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Daily Archives: April 27, 2016

Restrictions on Delaware Statutory Trusts

Although Delaware Statutory Trusts (DSTs) are a powerful way for investors to capitalize on securitized real estate, DSTs are not without limitations. IRS Revenue Ruling 2004-86 imposed some prohibitions on the power of the DST trustee. These prohibitions must be followed in order for the investors to be treated as acquiring a direct interest in real estate for tax purposes and thus qualify for 1031 exchange benefits. There are seven prohibited trustee activities. Once the trust offering is closed, no future contributions by existing or new investors is allowed. The trustee is prohibited from renegotiating any existing loan terms and can’t borrow new funds from anyone unless there is a […]