Capital Gains Tax Solutions Podcast The 1031 Exit Trap: How to Replace Debt and Defer Taxes Like the Top 1%
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Jan 14, 2026 Dan Palmer, a real estate and tax-deferred exchange expert, dives into the intricacies of 1031 exchanges and Delaware Statutory Trusts. He emphasizes the critical issue of debt-over-basis and its impact on tax deferral strategies. The discussion compares the benefits of using DSTs for replacing debt versus Deferred Sales Trusts. Palmer highlights how zero-coupon DSTs provide unique cash flow options, along with effective strategies to maximize returns while navigating tax limitations effectively. This podcast is a must-listen for anyone looking to optimize their investment strategies!
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Check Basis And Debt First
- Check sales price, adjusted basis, and debt first before choosing DST or Deferred Sales Trust.
- If debt exceeds basis, use a Delaware Statutory Trust to solve the debt-over-basis issue before deferring the remainder.
DST Can't Hide Debt-Over-Basis
- A Deferred Sales Trust cannot defer tax on debt that exceeds adjusted basis.
- Replacing that debt via a 1031 (e.g., Delaware Statutory Trust) lets you defer the tax on those proceeds.
Use A Partial 1031 To Replace Debt
- Use a partial 1031 or DST + Delaware combo to replace debt and free remaining proceeds.
- Put just enough equity into a Delaware (often ~20%) to replace debt and route remaining proceeds into a Deferred Sales Trust.
