Who was Bill and what challenges was he facing?

Bill was a lifelong cattle rancher in eastern Colorado, running thousands of head across thousands of acres. By his late 60s, the work had become too much, and his three daughters had long since moved to bigger cities. Bill and his wife dreamed of slowing down on a lifestyle ranchette in Oklahoma, where he could still run a few head of cattle for enjoyment without the burden of managing a massive operation.

But here’s the reality: Bill wasn’t working his Colorado ranch anymore. Instead, he was leasing it to another rancher at just a 1.5% cap rate. On a $20,000,000 property, that meant only $300,000 of annual income. Because this income came from land, not buildings, it was fully taxable with no depreciation to offset it. By the time the IRS took its share, Bill’s effective net income was far too low for the wealth he had tied up in the ranch.

Bill also had little in traditional retirement savings and no interest in Wall Street. Stocks and bonds didn’t appeal to him—his life had been built on real estate and livestock, and that’s where he wanted to keep his money. But selling his ranch meant facing a crushing tax bill unless he found the right structure.

What financial problem did Bill face before selling?

Bill sold his $20,000,000 Colorado ranch and purchased a $6,000,000 lifestyle ranch in Oklahoma. That left $14,000,000 of taxable boot that needed to be reinvested.

If he did nothing, he would have faced millions in capital gains taxes. On top of that, his old ranch had no depreciation left, which meant his lease income was fully exposed to taxation. For a man who prided himself on minimizing government take, handing millions to the IRS was not an option.

How did DSTs provide the solution?

Bill was introduced to the concept of the Delaware Statutory Trust (DST). It was exactly what he needed: real estate-based investments, fully passive, diversified across multiple asset types, and eligible for his 1031 exchange.

He rolled his $14,000,000 into a DST portfolio that included:

• Self-storage – reliable demand and simple operations

• Multifamily housing – essential housing in growth markets

• Student housing – steady occupancy from universities

• Fractionalized oil & gas royalties – hard-asset exposure with income potential

Here’s what changed for Bill:

• Mailbox money: His DST portfolio generated about $700,000 in potential annual income—more than double his $300,000 ranch lease.

• Monthly flow: Roughly $58,000 per month, without tenants, debt, or ranch management.

• Return on equity: Around 5–6% annualized, compared to 1.5% on the land lease.

• Tax sheltering: With a fresh depreciation schedule, his CPA confirmed ~75% of DST distributions could be shielded from taxes.

• Non-recourse debt: He shifted from recourse to non-recourse debt, protecting his balance sheet.

• Upside potential: By holding DSTs 5–7 years, he could potentially capture 6–8% appreciation, pushing total potential returns toward 11–12% annually.

How do DSTs simplify Bill’s legacy planning?

Bill’s top concern was making sure his three daughters would inherit fairly. With DSTs, each daughter will receive her own shares of the DST portfolio—avoiding fights over whether to sell or manage land. And because of the step-up in basis, all deferred capital gains vanish at his passing, leaving his heirs with a tax-efficient inheritance. His estate stays clean, equal, and secure.

What was the final outcome for Bill and his family?

Bill traded a 1.5% cap lease ($300,000 annually) + heavy taxes and land management headaches for 5–6% DST income, tax sheltering, and peace of mind.

He and his wife now enjoy life on their $6M Oklahoma ranchette—still able to manage a few cattle for fun—while their $14M DST portfolio quietly generates monthly mailbox money.

Disclosure: This story has been created for educational purposes only to illustrate how a 1031 exchange and Delaware Statutory Trusts (DSTs) can potentially be used in retirement and estate planning. The names, numbers, and circumstances were adjusted for demonstration. This is not an actual client or transaction. Investment outcomes, returns, and tax treatment will vary and are not guaranteed. Investors should consult their own tax advisor, CPA, and legal counsel before making any investment decisions.