Sell Your Rentals, Skip the Tax Bill: The 1031 DST Explained

You have owned the property for years. It has appreciated. You have depreciated it down to almost nothing. Now you are tired of tenants, tired of toilets, tired of property managers, tired of decisions about roofs and lease renewals. So you decide to sell, and then your CPA tells you how much tax you owe. "And suddenly selling doesn't sound that great." Most investors know a 1031 exchange defers that gain. The catch is that a traditional 1031 puts you right back into another property you have to identify, acquire, own, and manage. Heidi Henderson sits down with Todd Lofgren of Alternative Tax Management to walk through the option a surprising number of investors have never heard of. The Delaware Statutory Trust. A DST lets you roll your proceeds into fractional ownership of a professionally managed portfolio of properties. It satisfies the 1031 requirements, keeps you invested in real estate, and hands the day to day management to a sponsor. Todd calls it the exit ramp from the managerial role. Todd and Heidi cover the mechanics: what you actually own, how sponsors raise capital from accredited investors, why the debt on your old property has to come with you, and why the income comes back tax friendly because depreciation starts over. They also cover what you give up. Zero liquidity. No control. A four to seven year hold. And if you cash out, the capital gains and 25% depreciation recapture from that original property follow you the entire way. Todd breaks down due diligence too, where most investors are flying blind. Boutique shops with creative marketing and nothing behind the fact sheets. WHAT YOU'LL LEARN What a DST is, its 1988 Delaware origin, and the 2004 IRS ruling that made DSTs valid 1031 replacement property | Sponsors, accredited investors, and the $100,000 minimum | The boot problem and how leftover 1031 proceeds avoid a tax bill | Why a low basis after cost segregation makes selling so expensive | A $500,000 purchase that appreciated to $1 million, and why your debt must be replaced | Monthly and quarterly distributions and why the income is tax friendly | What it costs to exit: capital gains plus 25% recapture | The legacy play and the step up in basis for heirs | Zero liquidity vs UPREIT liquidity windows | How to tell a quality DST from one to avoid ABOUT TODD LOFGREN Todd Lofgren has over 25 years in financial services, working with institutional asset managers to provide investment solutions to financial advisors and CPAs. He delivers tax advantaged solutions for high net worth clients and small business owners. Todd lives in Berwyn, Pennsylvania with his wife Lianne and their three children. CONNECT WITH TODD LOFGREN Website: https://www.alternativetaxmanagement.... LinkedIn:   / todd-lofgren-awm   Email: tlofgren@alternativetm.com TIMESTAMPS 00:00 Tired of tenants, tired of toilets 00:40 The problem with selling appreciated real estate 02:20 Meet Todd Lofgren of Alternative Tax Management 05:02 Who comes looking for a DST and why 06:32 The boot problem: 1031 proceeds with nowhere to go 07:38 What a Delaware Statutory Trust actually is 07:52 1988 in Delaware and the 2004 IRS ruling 09:12 Accredited investors and the $100,000 minimum 09:48 What you own and how property type drives distributions 11:25 Diversifying across sponsors and asset classes 14:43 When cost segregation leaves you with no basis left 15:12 The due diligence gap most investors never see 20:29 The numbers: $500,000 purchase, $1 million sale 21:03 Why your debt has to come with you into the DST 22:01 How you get paid: monthly and quarterly distributions 23:42 The four to seven year horizon and expected returns 24:23 Capital gains and 25% recapture if you exit 24:49 The legacy play: step up in basis for your heirs 26:19 UPREIT liquidity windows vs zero liquidity 28:40 What separates a great DST from one to avoid 30:24 When to call: before you sell, or on day 43 32:20 How to reach Todd and final takeaways Resources: Free Cost Segregation Benefit Analysis: https://portal.engineeredtaxservices.... IRS Audit Technique Guidelines: https://www.irs.gov/pub/irs-pdf/p5653... Baselane Affiliate Link: https://baselane.com/engineeredtaxser... Baselane Promo Code: ENGINEERING6 Use ENGINEERING6 for 6 months free of Baselane Smart premium. Links: LinkedIn -   / heidihenderson   Instagram -   / slashtaxwithheidi   Facebook -   / slashtaxwithheidi   Engineered Tax Services has helped investors unlock millions in tax savings for nearly 25 years through cost segregation, R&D credits, and energy incentives. Visit engineeredtaxservices.com DSTs carry risk, fees, liquidity restrictions, and tax requirements. Nothing here is investment, tax, or legal advice. Evaluate any DST with a qualified professional. Subscribe to Slash Tax | Leave a review | Share with an investor ready to stop managing property