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Understanding DST 1031 Exchanges, Part 2

Investor Rights and Trustees Responsibilities in a Delaware Statutory Trust (DST)

When investing in a DST, investors purchase units of beneficial interest and become beneficiaries of the DST's operations. As beneficiaries, investors have the following rights and responsibilities:

• They have the right to receive distributions. Based on the investors' pro-rata interests in the trust, they have the right to receive distributions from the operations of the trust, either from rental income or from the eventual sale of the property. As with any business, operations can result in profits or losses; therefore, distributions are not guaranteed.

• They do not have the responsibility of property management. DSTs are operated and managed by trustees, removing any responsibility or right for the beneficiaries to participate in the day to day handling of the property's operation or the timing and details of the eventual sale of the property.

• They are not liable for the property. Investors do not have deeded title to the property; therefore, they are not liable for the property.

• They incur tax responsibility. Since the trust is not considered a taxable entity, all the profits, losses, etc. are passed through directly to the beneficiaries.

Now let's take a look at the responsibilities of the trustees of a DST:

• A DST is operated and managed by a trustee. Because the trust itself holds the deed to the property, the trustee's liability for the property is limited.

• The trustee has the responsibility to make decisions on behalf of the trust for the benefit of the beneficiaries. This includes day to day operations as well as the timing and arrangements for the sale of the trust's assets.

• The trustee must adhere to the IRS Ruling 2004-86, which names the seven deadly sins that limit the DST's trustee's power.

Learn More About DSTs

This material does not constitute an offer to sell or a solicitation of an offer to buy any security. An offer can only be made by a prospectus that contains more complete information on risks, management fees and other expenses. This literature must be accompanied by, and read in conjunction with, a prospectus or private placement memorandum to fully understand the implications and risks of the offering of securities to which it relates. As with all investing, investing in private placements are speculative in nature and involve a degree of risk, including loss of your principal. Past performance is not necessarily indicative of future results and forward-looking statements and projections are not guaranteed to achieve the results described and your actual returns may vary significantly. Investments in private placements are illiquid in nature and there may be no secondary market or ability to sell the investment should the need for liquidity arise. This material should not be construed as tax advice and you should consult with your tax advisor as individual tax situations will vary. Securities offered through Capulent, LLC, member FINRA, SIPC.