Who is Gene, and what challenge was he facing?

Gene is a cotton farmer in his mid-70s who has spent his entire life farming in West Texas. His family had grown cotton there for two generations, supplying a major corporate buyer with raw cotton for some of the largest consumer products in the country.

But the water table in West Texas is running dry. Each year, yields were shrinking. Gene’s two sons had already decided to move north to land with better water. Gene and his wife were left with one last big farm and the tough decision of how to turn it into a secure retirement strategy.

Why was this sale different from the others?

Over the years, Gene had already sold equipment and smaller parcels, paying millions in taxes each time. What he didn’t realize until it was too late was how devastating those tax bills were.

Now, with a $10 million contract on the table for his last and largest farm, Gene wanted to do things differently. He and his wife didn’t have much saved for retirement—they needed a strategy that could create potential income, or what farmers call mailbox money.

What would have happened if Gene sold outright?

If Gene sold the farm without planning, the IRS would have taken more than $4 million in taxes.

• Sale Price: $10,000,000

• Basis: ~$1,000,000 (estimated)

• Gain: ~$9,000,000

Taxes triggered:

• Capital Gains (25% blended rate): ~$2,250,000

• Depreciation Recapture: ~$1,750,000

• Total Taxes: Over $4,000,000

That would have left Gene and his wife with less than $6 million—far short of what they needed to create sufficient retirement income.

How did a DST change everything?

Instead of handing over $4M to the IRS, Gene worked with a representative from Iron Ridge Advisors to complete a 1031 exchange into a Delaware Statutory Trust (DST).

With the DST, Gene was able to:

• Defer all $4M in taxes.

• Reinvest the full $10M instead of only $6M.

• Generate potential distributions of $500,000 per year in potential income from diversified institutional real estate.

• His CPA estimated that 60-80% of his distributions would be Tax Sheltered.

• Simplify his estate planning, protecting his wife’s financial future.

• Structure his estate so that his sons will each inherit separate DST shares directly, avoiding disagreements over how to manage or divide the land.

• Ensure his sons inherit with a step-up in basis, permanently eliminating the deferred tax liability.

What’s Gene’s outcome today?

Gene and his wife transitioned from long days in the fields and shrinking yields to a structure designed to provide potential monthly income. Instead of worrying about wells running dry and watching his cotton contracts slip away, he and his wife now have a diversified real estate investment strategy aimed at supporting their retirement needs where they can focus more on the grandkids.

For his sons, the path is clear. They can continue their future farming up north without disputes over how to split their father’s land. By inheriting separate DST units, each son receives his fair share directly, and the step-up in basis wipes out the deferred taxes permanently.

What’s the lesson for other farmers and ranchers?

The highest sale price isn’t always the best deal. For landowners with highly appreciated property, taxes can wipe out millions.

Gene’s story shows how planning with a DST can help turn farmland into potential retirement income, preserve more equity, and protect a family’s legacy for the next generation.

⚠️ Disclosure: In the interest of protecting the client, real names and exact numbers were not used. However, the concept of what happened is accurately reflected in this case study. This is a hypothetical illustration based on a real scenario. Results may vary. This is not an offer to buy or sell securities. Potential cash flows, distributions, and income are not guaranteed and may vary. Investors should consult with their own tax, legal, and accounting advisors before making any investment decision.