K-1s and Taxes for Passive Real Estate Investors
What a Schedule K-1 reports, when it arrives, why extensions are common, and questions to bring to your CPA.
Read →Short answer
A 1031 exchange lets an investor defer capital gains tax by selling investment real estate and buying like-kind replacement property. You must identify replacement property in writing within 45 days of the sale and complete the purchase within 180 days (or by your tax return due date, if earlier). A Delaware Statutory Trust (DST) is a fractional ownership structure that can qualify as replacement property, letting investors exchange into professionally managed real estate. DST equity raised reached about $8.41 billion in 2025.
Key takeaways
- 45 days to identify, 180 days to close, both counted from the sale of the relinquished property.
- You can identify up to 3 properties, or more under the 200% or 95% rules.
- DST equity raised rose about 49% to ~$8.41B in 2025 (Mountain Dell Consulting).
- Multifamily made up 58% of syndicated DST offerings at the end of 2025.
The core 1031 rules
45 daysTo identify replacement property in writingFrom transfer of relinquished property
180 daysTo complete the exchange (or tax return due date, if earlier)Same start date
| Identification rule | How it works |
|---|---|
| Three-property rule | Identify up to three replacement properties of any value |
| 200% rule | Identify more than three, if their combined value is no more than 200% of what you sold |
| 95% rule | Identify any number, but acquire at least 95% of the total identified value |
Identification must be in writing, signed, and delivered to an independent party such as your qualified intermediary.
What is a DST, and why do 1031 investors use it?
A DST holds title to one or more properties; investors buy beneficial interests. Because a DST can qualify as like-kind replacement property, it gives exchangers a way to move from active landlording into passive, professionally managed real estate, and to close within tight deadlines.
DST equity raised by year
Billions of dollars
DST offerings by asset type, end of 2025
Share of offerings
DST trade-offs to understand
| Benefit | Trade-off |
|---|---|
| Passive ownership; no management | No control; trustee decisions are limited by DST rules |
| Can close quickly within 1031 deadlines | Illiquid; exit usually when the sponsor sells |
| Access to institutional-quality properties | Load and fees can be meaningful; compare offerings |
| Possible 721 (UPREIT) exit path in some programs | Exit terms vary; understand them upfront |
Planning an exchange
- Engage a qualified intermediary before you close the sale.
- Start reviewing replacement options (including DSTs) before day 1.
- Identify in writing by day 45; keep backups within the identification rules.
- Close by day 180; coordinate with your CPA on reporting.
Plan your timeline
Open the planner →Date every milestone backward from a closing date.
Frequently asked questions
You must identify potential replacement property in writing within 45 days of transferring the property you sold, and deliver the identification to an independent party such as your qualified intermediary.
You must acquire the replacement property within 180 days of the sale, or by the due date (including extensions) of your tax return for that year, whichever comes first.
Yes. Interests in a properly structured Delaware Statutory Trust can qualify as like-kind replacement property.
Mountain Dell Consulting reported about $8.41 billion of DST equity raised in 2025, up from about $5.66 billion in 2024.
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Sources
This guide is educational and is not investment, tax or legal advice, or an offer to buy or sell any security.
