DST vs TIC: Comparing 1031 Exchange Ownership Structures
Delaware Statutory Trusts (DSTs) and Tenants-in-Common (TIC) arrangements are the two fractional-ownership structures that let 1031 exchange investors own institutional-quality real estate alongside others. Both can qualify as a direct interest in real estate for a like-kind exchange, but they differ in control, financing, and how many investors can participate. The table below summarizes the practical differences.
| Factor | DST (Delaware Statutory Trust) | TIC (Tenants in Common) |
|---|---|---|
| IRS 1031 treatment | Beneficial interest treated as a direct interest in real estate (Rev. Rul. 2004-86). | Undivided fractional interest treated as direct real estate (Rev. Proc. 2002-22). |
| Number of investors | No statutory limit — commonly many investors, enabling lower minimums. | Limited to 35 co-owners under the IRS safe harbor. |
| Title & control | The trust holds title; investors hold passive beneficial interests and do not vote on operations. | Each investor holds direct deeded title and votes on major decisions. |
| Decision-making | The signatory trustee decides; investors have no day-to-day authority. | Major decisions typically require unanimous or majority co-owner consent — can create deadlock. |
| Financing | The trust is the single borrower on non-recourse debt; investors do not personally qualify for or sign the loan. | Lenders may underwrite multiple co-owners; financing more than one owner is more complex. |
| Liability | Bankruptcy-remote structure; investor liability is generally limited to the amount invested. | Each co-owner carries more direct exposure as a titled owner. |
| Typical minimum | Often lower, because interests are spread across more investors. | Often higher, given the 35-owner cap. |
| Prevalence today | The most common structure for smaller 1031 investors since 2004. | Less common after co-owner and financing frictions during the 2008–2009 downturn. |
Which structure fits which investor?
A DST suits investors who want a fully passive interest, a lower minimum, and no obligation to personally qualify for financing — the trustee handles every operating decision. A TIC suits investors who want direct deeded title and a vote on major property decisions and are willing to coordinate with a small group of co-owners. Because a DST removes co-owner deadlock and individual loan qualification, it has become the most common choice for smaller 1031 investors.
DST & TIC questions, answered
What is the difference between a DST and a TIC?
In a Tenants-in-Common (TIC) structure each investor holds direct deeded title to a fractional share of the property and votes on major decisions. In a Delaware Statutory Trust (DST) the trust holds title and investors own passive beneficial interests with no management authority. Both qualify as a direct interest in real estate for a 1031 exchange, but a DST allows more investors, lower minimums, and simpler financing.
Are DSTs and TICs both eligible for a 1031 exchange?
Yes. A TIC interest qualifies under IRS Revenue Procedure 2002-22 and a DST beneficial interest qualifies under IRS Revenue Ruling 2004-86, so an investor can use either to defer capital gains in a like-kind exchange when all other 1031 requirements are met.
How many investors can a TIC have?
The IRS safe harbor limits a TIC to 35 co-owners. A DST has no statutory limit on the number of investors, which is one reason DSTs typically offer lower minimum investments.
Why have DSTs become more common than TICs?
DSTs place financing on the trust rather than on individual investors, avoid the unanimous-consent deadlocks that can affect TICs, and allow more investors at lower minimums. After co-ownership and lending frictions during the 2008–2009 downturn, DSTs became the dominant fractional structure for 1031 exchanges.