The Oklahoma Bar Journal May 2026

T axation

Modernizing the §1031 Exchange: Leveraging Delaware Statutory Trusts To Serve Clients By John Newhouse and Ben Newhouse I NTERNAL REVENUE CODE (IRC) §1031 offers one of the most powerful strategies available to business owners and real estate investors to continue deferring payment of capital gains taxes that would otherwise become due upon the sale of an appreciated asset. 1 Most attorneys who practice in tax or real estate law are generally familiar with the require ments involved in conducting a qualifying §1031 tax-deferred exchange. However, very few such lawyers, as well as only a minority of certified public accountants (CPAs), are aware of how Delaware statutory trusts (DSTs) can also be effectively used to facilitate a fully qualified tax-deferred exchange transaction. Typically, clients engaging in a §1031 exchange transaction simply elect to “swap” one directly owned investment property for another. However, just as the real estate market has evolved, the IRS (via private letter ruling 2 ) has also evolved by recognizing and blessing the use of properly structured DSTs to also qual ify to receive §1031 tax-deferred exchange treatment.

This article explores the basics of §1031 exchanges, the structure and advantages of DSTs, import ant legal considerations and best practices for advising clients when considering the use of this modern ized vehicle to conduct an exchange transaction. THE LEGAL FRAMEWORK OF §1031 EXCHANGES Because the requirements and procedures of §1031 exchanges are well-known and widely understood amongst commercial and real estate

Statements or opinions expressed in the Oklahoma Bar Journal are those of the authors and do not necessarily reflect those of the Oklahoma Bar Association, its officers, Board of Governors, Board of Editors or staff.

24 | MAY 2026

THE OKLAHOMA BAR JOURNAL