--- title: "Rolling a DST Into an UPREIT via Section 721: Typical Holding Periods and Tax Trade-Offs" description: "Learn more about rolling a DST into an UPREIT via section 721: typical holding periods and tax trade-offs." image: https://www.realized1031.com/hubfs/iStock-1367970905-modified-11f699c0-4e15-4995-a85c-29afdbbb2677.jpg --- [![Realized 1031 Exchange Marketplace](https://www.realized1031.com/hs-fs/hubfs/Images/Brand/Logo/Realized/Realized-Logo-Black.png?width=240&height=80&name=Realized-Logo-Black.png "Realized 1031 Logo") ](https://www.realized1031.com/) - [Wealth Management Gap](https://www.realized1031.com/the-wealth-management-gap) - [Our Process](https://www.realized1031.com/how-realized-works) - [Financial Advisors](https://www.realized1031.com/advisor) - [Resources](https://www.realized1031.com/resources) - [The Company](https://www.realized1031.com/about-us) - [Articles](https://www.realized1031.com/blog) [Register](https://www.realized1031.com/marketplace) [Log In](https://www.realized1031.com/login) - Better Business Bureau Rating: **A+** - [FINRA BrokerCheck](https://brokercheck.finra.org/firm/summary/22333) - [Call](tel:1-877-797-1031) **(877) 797-1031** # Rolling a DST Into an UPREIT via Section 721: Typical Holding Periods and Tax Trade-Offs Posted Dec 20, 2025 ![iS-1367970905](https://www.realized1031.com/hs-fs/hubfs/iStock-1367970905-modified-11f699c0-4e15-4995-a85c-29afdbbb2677.jpg?width=2119&height=1191&name=iStock-1367970905-modified-11f699c0-4e15-4995-a85c-29afdbbb2677.jpg) Investing in Delaware Statutory Trusts (DSTs) offers a range of benefits, like passive income and diversification. However, you may reach a point where you want to move beyond the advantages of just DSTs and gain access to larger real estate portfolios. One strategy you can use is rolling a DST into an umbrella partnership real estate investment trust (UPREIT). This reinvestment strategy provides similar benefits to a DST, such as tax deferral and enhanced diversification. However, DSTs and UPREITs have vastly different structures and impacts that you’ll need to understand. In this article, Realized 1031 highlights holding periods and tax trade-offs should you choose to rollover your DST into an UPREIT. ### Basics of UPREITs Much like a DST, an UPREIT is a [trust entity that owns underlying income-generating assets](https://www.investopedia.com/terms/u/upreit.asp). Investors enter one through the 721 exchange, which is when you contribute your property to the operating partnership (OP) and receive OP units. You then earn [monthly dividends](https://www.realized1031.com/blog/an-explanation-of-upreits-and-dividend-payments) based on the number of OP units you possess. The 721 exchange is a tax-deferred transaction. This means that for those who entered a DST through a 1031 exchange, you can continue the deferral through the [UPREIT contribution](https://www.realized1031.com/blog/what-is-an-upreit-and-how-does-it-differ-from-traditional-reits). However, this step effectively terminates the 1031 exchange cycle. When you convert your OP units to REIT shares, the deferred capital gains will finally be taxable. You cannot restart another 1031 exchange with REIT shares, as these do not qualify as like-kind assets. ### Holding Periods When Converting DSTs to UPREITs DSTs are distinct because of their holding periods, which last from [five to seven years](https://www.forbes.com/councils/forbesfinancecouncil/2023/08/22/understanding-the-delaware-statutory-trust-full-cycle-event/) or more. Once the full-cycle event is over, the DST can decide what to do with the properties. One option is to contribute the assets to an UPREIT. UPREITs themselves don’t have a definite holding period that’s comparable to DSTs. These entities can hold properties for as long as needed. However, there is a holding period for converting OP units to REIT shares. This limit is usually just a year after the initial contribution. ### Tax Trade-Offs to Keep in Mind Your DST contributing its properties to an UPREIT exposes you to a larger real estate portfolio and high-level professional management. REIT shares are also more liquid than DST interests, giving added flexibility. However, there are a few [tax trade-offs](https://www.realized1031.com/blog/benefits-and-drawbacks-of-investing-in-an-upreit-structure) to keep in mind. For one, we’ve mentioned that the contribution effectively ends the 1031 exchange cycle. If you’ve been in several 1031 exchange cycles and accumulated deferred capital gains tax, then OP unit conversion can lead to a major tax hit. Thankfully, OP units are still eligible for a [step-up in basis upon your passing](https://taxfoundation.org/taxedu/glossary/step-up-in-basis/#:~:text=The%20step%2Dup%20in%20basis,reducing%20the%20heir's%20tax%20liability.). Since the capital gains and depreciation are reset, heirs won’t inherit the tax burden as they become the new beneficiaries of the OP units. ### Is a DST UPREIT Roll-Over the Best Strategy? The answer to this question depends on your unique needs as an investor. If you’re planning to hold for the long-term (which isn’t available with DSTs, since they have shorter holding periods), then UPREITs can be an ideal option. Your tax strategy also matters. UPREITs allow you to stagger capital gains tax payments by letting you convert OP units in increments. However, if you’d simply like to continue tax deferral, then reinvesting into another DST helps you continue the 1031 exchange cycle. Whatever the case, make sure to study the DST’s private placement memorandum to determine the exit options. Some DSTs may not offer UPREIT rollovers at all. ### Wrapping Up: Considerations for DST UPREIT Rollovers Exiting a DST by rolling over to an UPREIT can be a powerful move to ensure continued tax deferral while giving you flexible liquidity options. However, you need to make sure that you understand the long-term tax impact, required holding periods, and your overall investment goals before committing to the UPREIT contribution. **Sources:** [https://www.investopedia.com/terms/u/upreit.asp](https://www.investopedia.com/terms/u/upreit.asp) [https://www.forbes.com/councils/forbesfinancecouncil/2023/08/22/understanding-the-delaware-statutory-trust-full-cycle-event/](https://www.forbes.com/councils/forbesfinancecouncil/2023/08/22/understanding-the-delaware-statutory-trust-full-cycle-event/) [https://taxfoundation.org/taxedu/glossary/step-up-in-basis](https://taxfoundation.org/taxedu/glossary/step-up-in-basis/#:~:text=The%20step%2Dup%20in%20basis,reducing%20the%20heir's%20tax%20liability) Download The Guide To DSTs [![The Investor's Guidebook To DSTs](https://www.realized1031.com/hs-fs/hubfs/Images/UI/graphics/composites/DST-eBook-250.png?width=250&height=250&name=DST-eBook-250.png "See if Delaware Statutory ...") ](https://www.realized1031.com/blog/rolling-a-dst-into-an-upreit-via-section-721-typical-holding-periods-and-tax-trade-offs#blogform) Download eBook ---   --- ### The Investor's Guidebook To DSTs ![Download The Guide To DSTs](https://www.realized1031.com/hs-fs/hubfs/Images/UI/graphics/composites/DST-eBook-550.jpg?width=550&height=650&name=DST-eBook-550.jpg) See if Delaware Statutory Trusts are right for you. 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One strategy you can use is rolling a DST into an umbrella partnership real estate investment trust (UPREIT). This reinvestment strategy provides similar benefits to a DST, such as tax deferral and enhanced diversification. However, DSTs and UPREITs have vastly different structures and impacts that you’ll need to understand. In this article, Realized 1031 highlights holding periods and tax trade-offs should you choose to rollover your DST into an UPREIT. Basics of UPREITs Much like a DST, an UPREIT is a trust entity that owns underlying income-generating assets. Investors enter one through the 721 exchange, which is when you contribute your property to the operating partnership (OP) and receive OP units. You then earn monthly dividends based on the number of OP units you possess. The 721 exchange is a tax-deferred transaction. This means that for those who entered a DST through a 1031 exchange, you can continue the deferral through the UPREIT contribution. However, this step effectively terminates the 1031 exchange cycle. When you convert your OP units to REIT shares, the deferred capital gains will finally be taxable. You cannot restart another 1031 exchange with REIT shares, as these do not qualify as like-kind assets. Holding Periods When Converting DSTs to UPREITs DSTs are distinct because of their holding periods, which last from five to seven years or more. Once the full-cycle event is over, the DST can decide what to do with the properties. One option is to contribute the assets to an UPREIT. UPREITs themselves don’t have a definite holding period that’s comparable to DSTs. These entities can hold properties for as long as needed. However, there is a holding period for converting OP units to REIT shares. This limit is usually just a year after the initial contribution. Tax Trade-Offs to Keep in Mind Your DST contributing its properties to an UPREIT exposes you to a larger real estate portfolio and high-level professional management. REIT shares are also more liquid than DST interests, giving added flexibility. However, there are a few tax trade-offs to keep in mind. For one, we’ve mentioned that the contribution effectively ends the 1031 exchange cycle. If you’ve been in several 1031 exchange cycles and accumulated deferred capital gains tax, then OP unit conversion can lead to a major tax hit. Thankfully, OP units are still eligible for a step-up in basis upon your passing. Since the capital gains and depreciation are reset, heirs won’t inherit the tax burden as they become the new beneficiaries of the OP units. Is a DST UPREIT Roll-Over the Best Strategy? The answer to this question depends on your unique needs as an investor. If you’re planning to hold for the long-term (which isn’t available with DSTs, since they have shorter holding periods), then UPREITs can be an ideal option. Your tax strategy also matters. UPREITs allow you to stagger capital gains tax payments by letting you convert OP units in increments. However, if you’d simply like to continue tax deferral, then reinvesting into another DST helps you continue the 1031 exchange cycle. Whatever the case, make sure to study the DST’s private placement memorandum to determine the exit options. Some DSTs may not offer UPREIT rollovers at all. Wrapping Up: Considerations for DST UPREIT Rollovers Exiting a DST by rolling over to an UPREIT can be a powerful move to ensure continued tax deferral while giving you flexible liquidity options. However, you need to make sure that you understand the long-term tax impact, required holding periods, and your overall investment goals before committing to the UPREIT contribution. Sources: https://www.investopedia.com/terms/u/upreit.asp https://www.forbes.com/councils/forbesfinancecouncil/2023/08/22/understanding-the-delaware-statutory-trust-full-cycle-event/ https://taxfoundation.org/taxedu/glossary/step-up-in-basis", "articleSection" : [ "Delaware Statutory Trusts (DST)" ], "author" : { "@type" : "Person", "email" : "marketing@realized1031.com", "image" : "", "name" : "The Realized Team", "url" : "https://www.realized1031.com/blog/author/the-realized-team" }, "dateModified" : "2025-12-20T15:00:00+0000", "datePublished" : "2025-12-20T15:00:00+0000", "description" : "Learn more about rolling a DST into an UPREIT via section 721: typical holding periods and tax trade-offs.", "headline" : "Rolling a DST Into an UPREIT via Section 721: Typical Holding Periods and Tax Trade-Offs", "image" : { "@type" : "ImageObject", "height" : 1191, "url" : "https://733513.fs1.hubspotusercontent-na1.net/hubfs/733513/iStock-1367970905-modified-11f699c0-4e15-4995-a85c-29afdbbb2677.jpg", "width" : 2119 }, "mainEntityOfPage" : "https://www.realized1031.com/blog/rolling-a-dst-into-an-upreit-via-section-721-typical-holding-periods-and-tax-trade-offs", "name" : "Rolling a DST Into an UPREIT via Section 721: Typical Holding Periods and Tax Trade-Offs", "publisher" : { "@type" : "Organization", "address" : { "@type" : "PostalAddress", "addressCountry" : "USA", "addressLocality" : "Austin", "addressRegion" : "TX", "postalCode" : "78701", "streetAddress" : "500 W 13th Street " }, "logo" : { "@type" : "ImageObject", "height" : 60, "url" : "http://www.realized1031.com/hubfs/Images/Brand/Logo/Realized/Realized-Logo-Black-No-Margin-296x60-AMP.png", "width" : 296 }, "name" : "Realized" }, "thumbnailUrl" : "https://733513.fs1.hubspotusercontent-na1.net/hubfs/733513/iStock-1367970905-modified-11f699c0-4e15-4995-a85c-29afdbbb2677.jpg" } ```