Who Was the Client and What Were Their Pain Points?

Jackie Hansen, a 64-year-old farmer in western Oklahoma, had spent decades working and leasing his acreage. He was proud to finally be debt-free, but his property was wearing him down. Instead of farming, he leased the land out at below-market rents. The small income barely covered climbing insurance premiums, rising property taxes, and maintenance.

Jackie had also owned the farm long enough that his depreciation benefits were fully used up. Every dollar of rent was now fully taxed as ordinary income. And after years of staying debt-free, the thought of taking on another loan — especially a recourse loan — was out of the question.

What Financial Struggles Did Jackie Face Before the Sale?

Jackie’s lease income was $18,000 a year — only about a 1.5% cap rate on his $1.2 million property. Insurance kept climbing, property upkeep was constant, and he had no way to grow his income.

To make matters worse, every bit of rent was taxed, and with depreciation exhausted, there was no tax shelter left. Jackie felt stuck: a valuable asset that was producing very little net income, fully exposed to tax, and bringing him no peace of mind.

How Did the DST Solution Transform Jackie’s Finances?

When Jackie sold his farm for $1.2 million, he cleared the closing without debt because he had already paid off his mortgage years earlier. His qualified intermediary then rolled the equity into a diversified portfolio of Delaware Statutory Trusts (DSTs).

Here’s what changed:

• Monthly Potential Income: Jackie’s new DST portfolio provided about $6,250 per month, or $75,000 annually. That’s more than four times what his farm lease was generating.

• Return on Equity: On his $1.2 million investment, Jackie’s potential return jumped from 1.5% to over 6%.

• Tax Shielding: His CPA confirmed that with a fresh depreciation schedule, roughly 75% of his DST distributions could be sheltered from taxes. Instead of paying on every dollar like before, much of his mailbox money could be protected.

• Stress Relief: No more tenants, property taxes, insurance battles, or maintenance headaches. The DST sponsor handled management.

• Non-Recourse Debt Advantage: While some DSTs used 50% non-recourse leverage, Jackie didn’t sign a loan personally. He avoided the risk of recourse debt while still benefiting from leverage’s tax advantages.

• Long-Term Potential: If he holds his DSTs for 5–7 years, Jackie could potentially benefit from capital appreciation as well. Historically, prior DST programs have averaged 6–8% annually in appreciation. Combined with income, that could bring his total return closer to 11–12% per year.

How Do DSTs Simplify Estate Planning for Jackie’s Family?

Jackie also wanted to leave a smooth legacy. With DSTs:

• Heirs receive separate shares of the DST interests, eliminating disputes about “who gets what.”

• Step-Up in Basis: At Jackie’s passing, his heirs inherit the DST interests at fair market value, which eliminates deferred capital gains taxes.

• Tax-Efficient Legacy: Instead of inheriting farmland with tax liabilities and management headaches, his children will inherit passive income streams and clean tax treatment.

Here’s the visual comparison: Jackie’s old lease property earned about $13,500 post-tax, while his DST portfolio with 50% non-recourse leverage produced about $67,500 post-tax thanks to stronger cash flow and tax shielding.

What Was the Final Outcome for Jackie Hansen?

Jackie traded a farm that produced $18,000 a year in fully taxable rent for a diversified DST portfolio generating over $75,000 a year in mailbox money, with most of it shielded from taxes.

He walked away from tenants, broken fences, insurance bills, and property management — and stepped into peace of mind, higher potential income, non-recourse protection, and a streamlined family legacy.

Jackie says the decision wasn’t easy. As a debt-free farmer, taking on DST leverage felt wrong at first. But once he understood that it was non-recourse debt tied only to the properties, not to him personally, he realized it wasn’t really “debt” in the way he feared.

Today, Jackie enjoys retirement with confidence, knowing he traded stress for security — and built a tax-smart legacy for his family.

Disclosure: This case study is for educational purposes only. The names, numbers, and circumstances have been adapted for illustrative use and do not represent an actual client or transaction. DSTs involve risks, including potential loss of principal and illiquidity, and are offered only to accredited investors. Investors should consult their CPA, attorney, and qualified intermediary before making any investment or 1031 exchange decisions.