Grantor Trust Tax Information Statement vs. Schedule K‑1: Understanding the Difference

Part 2 — Under­stand­ing Your DST Tax Pack­age

DST.EDU Spe­cial Series

Octo­ber 9, 2026

By Al DiNi­co­la, AIF®
Pri­vate Fund Advi­sor
DST 1031 Spe­cial­ist
Fidu­cia­ry Cap­i­tal Man­age­ment, LLC

What Investors and Their CPAs Need to Know About DST Tax Report­ing

One ques­tion I hear often dur­ing tax sea­son is:

“Where is my K‑1?”

It is a rea­son­able ques­tion. Many real estate investors have owned part­ner­ships, LLCs, pri­vate funds, or oth­er pass-through invest­ments where receiv­ing a Sched­ule K‑1 is part of the annu­al rou­tine. You wait for it, send it to your CPA, and move on.

Then you invest in a Delaware Statu­to­ry Trust, tax sea­son arrives, and there may be no K‑1.

That does not nec­es­sar­i­ly mean any­thing is miss­ing. It may sim­ply mean the DST is being report­ed under a dif­fer­ent fed­er­al tax frame­work.

Why Real Estate Investors Expect a K‑1

Many pri­vate real estate invest­ments are orga­nized as part­ner­ships or LLCs taxed as part­ner­ships. Those enti­ties gen­er­al­ly pro­vide each investor with a Sched­ule K‑1 show­ing an allo­cat­ed share of income, deduc­tions, cred­its, gains, loss­es, and oth­er tax items.

I some­times explain it this way: the K‑1 is essen­tial­ly say­ing, “Here is your share of the tax activ­i­ty gen­er­at­ed by this part­ner­ship.”

A prop­er­ly struc­tured DST can work dif­fer­ent­ly.

A DST Is Not Sim­ply Anoth­er Real Estate Part­ner­ship

This is where IRS Rev­enue Rul­ing 2004–86 becomes impor­tant.

In that rul­ing, the IRS con­sid­ered a spe­cif­ic Delaware Statu­to­ry Trust struc­ture and con­clud­ed that it qual­i­fied as an invest­ment trust for fed­er­al income-tax pur­pos­es. The ben­e­fi­cial own­ers were treat­ed as own­ing pro­por­tion­ate inter­ests in the under­ly­ing trust prop­er­ty.

That dis­tinc­tion affects report­ing. Rather than sim­ply receiv­ing a part­ner­ship allo­ca­tion, the DST ben­e­fi­cial own­er may receive tax infor­ma­tion asso­ci­at­ed with his or her pro­por­tion­ate inter­est in the under­ly­ing real estate.

Here’s the impor­tant part: the struc­ture helps deter­mine the report­ing.

Meet the Grantor Trust Tax Infor­ma­tion State­ment

Instead of a tra­di­tion­al Sched­ule K‑1, a DST investor may receive a Grantor Trust Tax Infor­ma­tion State­ment, Grantor Trust Let­ter, Own­er Infor­ma­tion State­ment, or some­thing sim­i­lar. The title and for­mat can vary by spon­sor.

I sug­gest think­ing of this state­ment as a road map to your pro­por­tion­ate tax infor­ma­tion from the under­ly­ing prop­er­ty.

Depend­ing on the DST and report­ing method, it may include your pro­por­tion­ate share of rental real estate income, mort­gage inter­est, real estate tax­es, oper­at­ing expens­es, depre­ci­a­tion, and oth­er applic­a­ble items.

Do not assume there will be one num­ber labeled “net income” that tells the whole sto­ry. Your CPA may need to review sev­er­al pieces of infor­ma­tion togeth­er.

Every investor can also have a dif­fer­ent tax his­to­ry. Whether you used cash or com­plet­ed a §1031 exchange, your tax basis and pri­or depre­ci­a­tion can affect your tax result. Two investors can put the same amount into the same DST and still have dif­fer­ent tax out­comes.

Why a K‑1 May Not Be the Cor­rect Doc­u­ment

IRS instruc­tions for Form 1041 describe spe­cial report­ing rules for grantor trusts. Gen­er­al­ly, applic­a­ble income and deduc­tions are treat­ed as belong­ing direct­ly to the per­son treat­ed as the own­er.

The instruc­tions also pro­vide that when the entire trust is treat­ed as a grantor trust using the reg­u­lar report­ing method, Sched­ule K‑1 is not used as the attach­ment for report­ing those own­er items.

That helps explain why a DST investor may receive a Grantor Trust Tax Infor­ma­tion State­ment instead of the K‑1 the investor expect­ed.

So when some­one asks me, “Why didn’t I get a K‑1?” I would rather have them ask:

“What report­ing method is this DST using, and did I receive the com­plete tax pack­age?”

That is usu­al­ly the bet­ter ques­tion for both the investor and the CPA.

Can a DST Investor Ever Receive a K‑1?

We should not say that a DST investor can nev­er receive a K‑1.

A K‑1 may become rel­e­vant if the struc­ture is treat­ed as a part­ner­ship for fed­er­al tax pur­pos­es. One exam­ple is the uncom­mon sit­u­a­tion in which a DST con­verts into what is com­mon­ly called a Spring­ing LLC. In that case, sub­se­quent tax report­ing may change, includ­ing the pos­si­bil­i­ty of K‑1 report­ing.  That is not the typ­i­cal DST report­ing sit­u­a­tion, but it is a reminder that the name “Delaware Statu­to­ry Trust” by itself does not tell you every­thing about fed­er­al tax report­ing.

The Doc­u­ments Tell Dif­fer­ent Sto­ries

A Sched­ule K‑1 and a DST Grantor Trust Tax Infor­ma­tion State­ment both com­mu­ni­cate tax infor­ma­tion, but they gen­er­al­ly relate to dif­fer­ent struc­tures.

A Sched­ule K‑1 gen­er­al­ly reports an investor’s allo­cat­ed tax items from a part­ner­ship or anoth­er enti­ty using K‑1 report­ing.

A DST Grantor Trust Tax Infor­ma­tion State­ment gen­er­al­ly pro­vides the ben­e­fi­cial owner’s pro­por­tion­ate tax infor­ma­tion asso­ci­at­ed with the under­ly­ing real estate.

Nei­ther doc­u­ment is bet­ter or worse. They sim­ply serve dif­fer­ent struc­tures.

Dif­fer­ent doc­u­ment. Dif­fer­ent struc­ture. Same need for care­ful tax prepa­ra­tion.

Don’t Look for Just One “Income” Num­ber

Anoth­er mis­take I occa­sion­al­ly see is an investor open­ing the DST tax pack­age and look­ing for one num­ber that rep­re­sents the entire tax result.

You may see rental income in one place, mort­gage inter­est some­where else, real estate tax­es on anoth­er line, oper­at­ing expens­es on a sup­port­ing sched­ule, and depre­ci­a­tion shown sep­a­rate­ly. Those items may all be rel­e­vant in deter­min­ing tax­able rental income.

There is anoth­er dis­tinc­tion we will cov­er lat­er in this series: cash dis­trib­uted dur­ing the year is not nec­es­sar­i­ly the same as tax­able income report­ed for that year.

For now, the point is sim­ple. The Grantor Trust Tax Infor­ma­tion State­ment gives your tax pro­fes­sion­al infor­ma­tion to ana­lyze. It is not nec­es­sar­i­ly one num­ber to copy into tax soft­ware.

Report­ing For­mats Can Vary

If you own more than one DST, the tax pack­ages may not look the same. One spon­sor may pro­vide a detailed Grantor Trust Tax Infor­ma­tion State­ment with sup­port­ing sched­ules. Anoth­er may pro­vide an own­er state­ment with cer­tain Forms 1099. Anoth­er pack­age may include depre­ci­a­tion sched­ules, cost-seg­re­ga­tion infor­ma­tion, or state-spe­cif­ic tax infor­ma­tion.

That does not nec­es­sar­i­ly mean one pack­age is bet­ter than anoth­er. Report­ing for­mats can vary by trust, prop­er­ty, spon­sor, report­ing method, and activ­i­ty dur­ing the year.

What Should You Do When the Tax Pack­age Arrives?

The investor’s respon­si­bil­i­ty is fair­ly sim­ple:

• Down­load and save the com­plete pack­age.
• Keep every sup­port­ing sched­ule.
• Do not dis­card a doc­u­ment because you do not rec­og­nize it.
• Do not assume a K‑1 is miss­ing sim­ply because one did not arrive.
• Send the entire pack­age to your CPA or tax pre­par­er.

I would rather have an investor give the CPA one doc­u­ment too many than decide on their own that a sched­ule is unim­por­tant.

This is espe­cial­ly impor­tant if the DST was acquired through a §1031 exchange. Pri­or basis, depre­ci­a­tion, and exchange his­to­ry may affect the investor’s indi­vid­ual tax treat­ment.

A Good Con­ver­sa­tion to Have With Your CPA

If your CPA has not pre­vi­ous­ly worked with your DST invest­ment, a use­ful ques­tion is:

“This invest­ment is being report­ed through a Grantor Trust Tax Infor­ma­tion State­ment rather than a part­ner­ship K‑1. Have I pro­vid­ed you with the com­plete pack­age and all of the sup­port­ing sched­ules you need?”

That opens the con­ver­sa­tion with­out try­ing to tell the CPA how to pre­pare the return.

The Bot­tom Line

If a K‑1 does not arrive with your DST tax pack­age, do not imme­di­ate­ly assume some­thing is miss­ing.

A DST struc­tured con­sis­tent­ly with the invest­ment-trust treat­ment dis­cussed in Rev­enue Rul­ing 2004–86 can fol­low a dif­fer­ent fed­er­al tax-report­ing frame­work from part­ner­ships and LLCs.

The dis­tinc­tion is straight­for­ward: a K‑1 gen­er­al­ly reports your allo­cat­ed share of tax items from a part­ner­ship or anoth­er K‑1-report­ing enti­ty, while a DST Grantor Trust Tax Infor­ma­tion State­ment gen­er­al­ly pro­vides infor­ma­tion asso­ci­at­ed with your pro­por­tion­ate tax inter­est in the under­ly­ing real estate.

You do not need to become an expert in trust tax­a­tion. You should under­stand what you received, why it may look dif­fer­ent, and why your CPA should receive the com­plete pack­age rather than just the first page.

Investor/CPA Take­away

Do not assume that a miss­ing K‑1 means a tax doc­u­ment is miss­ing. Review the DST’s Grantor Trust Tax Infor­ma­tion State­ment, any applic­a­ble Forms 1099, and all sup­port­ing sched­ules before deter­min­ing how the invest­ment should be report­ed.

In Part 3 of our DST.EDU series, we will walk through a typ­i­cal DST Fed­er­al Tax Infor­ma­tion State­ment, includ­ing rental income, mort­gage inter­est, real estate tax­es, oper­at­ing expens­es, and depre­ci­a­tion.

Delaware Statu­to­ry Trusts (DSTs) have become a notable part of com­mer­cial real estate invest­ing. As Al DiNi­co­la empha­sizes, a DST is a struc­ture, not an asset class, the focus should remain on the qual­i­ty of the under­ly­ing prop­er­ty and how it fits your goals.  DSTs are for accred­it­ed investors and car­ry risks, i.e. illiq­uid­i­ty, real estate mar­ket fluc­tu­a­tions, and spon­sor deci­sions. Con­sult your advis­er about suit­abil­i­ty, espe­cial­ly for §1031 exchanges. For more details, please con­tact:

• Al DiNi­co­la adnicola@fiduciarycm.com  
• Direct: 239 691 8098
• Sched­ule Appoint­ment

Advi­so­ry ser­vices are offered through Fidu­cia­ry CM, an SEC-reg­is­tered advis­er. Invest­ments involve risk and are not guar­an­teed. Always refer to offer­ing doc­u­ments for full risk dis­clo­sures. Delaware Statu­to­ry Trust (DST) invest­ments involve risks asso­ci­at­ed with com­mer­cial real estate own­er­ship and are not suit­able for all investors. These risks may include, but are not lim­it­ed to, loss of prin­ci­pal, illiq­uid­i­ty, ten­ant vacan­cy, financ­ing risk, inter­est rate fluc­tu­a­tions, prop­er­ty val­ue declines, eco­nom­ic and mar­ket con­di­tions, and risks asso­ci­at­ed with spon­sor and prop­er­ty man­age­ment deci­sions. Please refer to the applic­a­ble Prop­er­ty Pri­vate Place­ment Mem­o­ran­dum (PPM) for a com­plete dis­cus­sion of the risks and con­sid­er­a­tions spe­cif­ic to that offer­ing. Secu­ri­ties-relat­ed activ­i­ties, where applic­a­ble, are con­duct­ed through the author’s then-cur­rent reg­is­tered bro­ker-deal­er, mem­ber FINRA/SIPC. Cur­rent reg­is­tra­tion infor­ma­tion is avail­able through FINRA Bro­kerCheck. Past per­for­mance is not indica­tive of future results. Nei­ther the Reg­is­tered Rep­re­sen­ta­tive nor the Bro­ker-Deal­er can con­trol or guar­an­tee future deci­sions made by the DST spon­sor, asset man­ag­er, prop­er­ty man­ag­er, ten­ants, lenders, or oth­er third par­ties involved in the oper­a­tion of the prop­er­ty. Past per­for­mance is not indica­tive of future results. For edu­ca­tion­al pur­pos­es only; not tax, legal, secu­ri­ties, or invest­ment advice and not an offer or solic­i­ta­tion to buy or sell secu­ri­ties.