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Karen E. Kennedy

About the Author

Karen E. Kennedy's expertise spans various areas, including 1031 Exchanges, Delaware Statutory Trust (DST) structured investments, fractional interest ownership, tenancy-in-Common (TIC) owned properties, property acquisitions, portfolio management, and investor relations.

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Frequently Asked Questions

  • What are the advantages of a DST-Structured investment in commercial property?

    There are numerous advantages to investing in a DST structured property offering.

    • The purchase of DST interests is simpler, faster and does not require as many documents as buying sole ownership of a property.
    • Capital Gains are deferred, if investment is for a 1031 Exchange
    • No daily property management obligations that come with sole ownership
    • Ability to create a diversified real estate investment portfolio
    • Cash flow distributions
    • Annual depreciation/tax deductions
    • Appreciation upon sale of the property
    • Upon the sale of a DST property, the investor may engage in a 1031 exchange, even if the DST interest was purchased without 1031 exchange proceeds.
    • A DST is a pass-through tax entity, which is not subject to federal income tax, nor to the Delaware franchise or income tax.
    • Because the DST is the mortgage borrower, the lender does not require individual DST investor guarantees, nor does the lender require investors to submit personal financial information to qualify for the mortgage loan.
    • Investors with interest in a DST property are protected from property liabilities held by the DST. As a result, the maximum pre-tax loss (excluding income tax considerations) is equal to the amount invested in the DST.
  • Are there a minimum and maximum investment amounts to participate in a DST property offering?

    • Yes; $50,000 to $100,000 are typical minimum investment amounts but this may vary from sponsor to sponsor.
    • The maximum amount is contingent on the overall size of the DST offering and the discretion of the DST Sponsor.
  • Are DST-Structured properties commonly used for a 1031 Exchange?

    Interests in Delaware Statutory Trusts are the primary investment method for fractional 1031 exchange investments at this time.

  • Are there any restrictions on a DST-Structured Investment?

    • The IRS places several prohibitions on the power of DST trustees if the Delaware Statutory Trust is to be used with a 1031 tax deferred exchange. There are seven restrictions, sometimes referred to as the ‘Seven deadly sins of a DST’:
      • Once a DST offering is closed there can be no further contributions by current owners, new owners, or beneficiaries.
      • Existing loan terms cannot be renegotiated, nor can new funds be borrowed, by the DST trustee.
      • Sales proceeds from the investment real estate cannot be reinvested by the DST trustee.
      • Capital expenditures can only be made by the DST trustee for normal repair and maintenance, minor non-structural capital improvements, or those required by law (such as items related to zoning codes).
      • Liquid cash held by the DST between distribution dates can only be invested in short-term debt obligations.
      • All cash in excess of necessary reserves must be distributed to investors.
      • New leases or re-negotiations of current leases may not be entered into by the DST trustee.
  • How does an investment in a DST-Structured property differ from an investment in a TIC-Structured property?

    • Like TICs, DSTs have multiple investors that purchase fractional interests and the investors share in the total financial performance of the underlying investment property. However, the primary differences between the two investment structures are:
      • A DST is not limited to a maximum of 35 investors required by Revenue Procedure 2002-22.
      • DST investors (Beneficiaries) are purchasing a beneficial interest in a trust and do not receive deeded property.
      • Beneficiaries in a DST are not necessarily required to form single-member Limited Liability Companies (LLCs).
      • Beneficiaries do not have voting rights or operational control of the property.
      • In a DST structure, there can be no cash calls or additional money invested into the property beyond typical maintenance and certain capital expenditure needs, unlike in TICs.
  • What is a 1031 Exchange?

    A 1031 exchange is a swap of one real estate investment property for another in a specific way that allows for capital gains taxes to be deferred.

  • How a 1031 Exchange is Accomplished?

    There are seven recommended steps common to most Section 1031 tax deferred exchange:


    Step 1: Consider retaining the services of a certified public accountant or an attorney with tax deferred exchange experience to assist in planning for an exchange.

    Step 2: Engage a Qualified Intermediary, or “QI,” (also called an Accommodator), being sure to name the QI as the principal in the sale of the relinquished property and in the purchase of the replacement property.

    Step 3: Sell the relinquished property, making sure to include a cooperation clause requiring the buyer to cooperate with the seller’s 1031 exchange, and instruct the escrow officer or closing agent to order exchange documents from the QI.


    Step 4: Escrow closes on the relinquished property, with the closing statement showing the QI as the seller, and sales proceeds from the relinquished property are sent to the QI and placed in a separate segregated trust account.


    Step 5: Within 45 calendar days of the close of escrow of the relinquished property the exchanger identifies one or more replacement properties and sends written notice of this to the QI.

    Step 6: The exchanger executes a purchase contract with the seller of the replacement property, making sure the cooperation clause is included in the purchase contract, and naming the QI as the buyer of the replacement property.

    Step 7: Within 180 calendar days of the close of escrow of the relinquished property, the exchanger instructs the QI to transfer funds to close escrow and sends 1031 exchange-related documents to the escrow company, and the sale closes with the closing statement showing the QI as the buyer on behalf of the exchanger.

    • After the replacement property has closed escrow, the QI will send a final accounting statement to the exchanger. The statement will show that funds have come from one escrow directly into another, all without the taxpayer having constructive receipt of the funds.
    • Real estate investors should note that although the qualified intermediary is indicated as the seller and buyer on the purchase contracts, the deed and title are always from the taxpayer to the buyer, and from the seller to the taxpayer.
  • What qualifies as a “like-kind” replacement property?

    • The definition of a qualifying like-kind property is very broad, for both the sold property and the replacement property: real estate used for investment or business purposes. Personal use property is not eligible.
    • Investment real estate (held for either appreciation or for rental) can be exchanged for real property used in a trade or business. Partial interests such as TICs or DSTs, are exchangeable with other types of real property.
  • How is a replacement property identified?

    A like-kind replacement property is identified if it is designated as replacement property in a written document signed by the exchanging party and received by the QI before the end of the 45-day identification period. Every QI uses their own form of documentation. Please consult with your QI to determine the exact procedure they require.

Des Moines Iowa’s Major Employers

Wells Fargo & Company
Financial Services | 11,000 employees
Hy-Vee, Inc.
Supermarkets | 11,184 employees
Financial Services & Insurance | 6,100 employees
Healthcare | 5,777 employees
UnityPoint Health
Healthcare | 5,492 employees
Tech – Ecommerce | 4,100 employees
John Deere: Des Moines Works, Financial, and Intelligent Solutions Group (ISG)
Manufacturing Agricultural Equipment | 3,328 employees
Financial Services | 3,300 employees
Vermeer Corporation
Manufacturing Agricultural Equipment | 3,200 employees
Meat Processing: 2,300 employees
Corteva Agriscience
Agricultural Research & Science | 2,255 employees
Pella Corporation
Manufacturing | 2,224 employees
Kum & Go:
Retail Convenience Stores | 2,000 employees
Mercer Health & Benefits, LLC:
Health Insurance | 1,800 employees
Logistics | 1,721 employees
Wellmark Blue Cross Blue Shield of Iowa
Healthcare Insurance | 1,600 employees
Bridgestone Americas Tire Operations
Manufacturing | 1,600 employees
Communications Technology | 1,500 employees
Financial Services | 1,450 employees
Casey’s General Stores, Inc.
Convenience Stores | 1,200 employees

*Des Moines Area Apple and Meta Employee Numbers Are Not Yet Publicly Available

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Karen E. Kennedy

Compiled By: Karen E. Kennedy

President & Founder NAS Investment Solutions

Karen E. Kennedy's over-40 years experience spans various areas, including 1031 Exchanges, Delaware Statutory Trust (DST) structured investments, fractional interest ownership, Tenancy-in-Common (TIC) owned properties, property acquisitions, portfolio management, and investor relations. See Full Bio

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