The short answer
Your ownership percentage is the equity you pay divided by the total equity the offering sells, at the price per interest stated in the memorandum. That percentage then applies to everything the trust owns and owes: you are treated as owning that fraction of the real estate under Rev. Rul. 2004-86, subject to that fraction of the trust's loan. The offering costs are already inside the price per interest, so your percentage of the property's value is not the same as your cash divided by the purchase price of the building. Your Form 8824 uses the percentage to report your share of the property and the debt.
At a glance
| Formula | Your equity divided by total investor equity at the memorandum price |
|---|---|
| What it applies to | Property, loan, rent, expenses, depreciation and sale proceeds |
| Tax view | An undivided fractional interest in the trust's real estate |
| Set by | The manager, in your purchase agreement, at no less than the memorandum price |
| Before the raise closes | The sponsor's affiliate holds the unsold percentage and is redeemed as investors buy |
| Form 8824 | Your share of property value received and your share of debt assumed |
Your percentage is your equity over total equity at the offering price
A form of DST trust agreement filed with the SEC as an exhibit to a REIT's 2019 Form 10-Q shows how the number is set. The cash contributed by each investor and that investor's percentage share are determined by the manager and stated in the investor's purchase agreement, based on a purchase price no lower than the price per interest disclosed in the memorandum.
The same agreement defines percentage share as each owner's portion of the aggregate beneficial interest, with all classes adding to 100 percent. Before investors arrive, a sponsor affiliate holds the whole trust; each investor purchase redeems a matching slice of the affiliate's interest, until the affiliate holds nothing.
So if an offering is sized to raise a fixed amount of equity, your fraction is your purchase divided by that total. If the offering does not sell out, the affiliate keeps the unsold fraction, and your percentage does not grow.
The same fraction carries the loan and the property
Rev. Rul. 2004-86 holds that each investor in a qualifying DST is treated as the owner of an aliquot portion of the trust and therefore owns an undivided fractional interest in the real estate for federal tax purposes. The trust's mortgage encumbers the whole property, so your fraction of the property comes with the same fraction of the debt.
That is why a DST loan can replace the mortgage you paid off on the sale. How DST debt counts as replacement debt is covered separately; the point here is that the amount counted is your percentage times the trust's loan balance at acquisition.
Rent, expenses, depreciation and eventual sale proceeds follow the same fraction. The filed trust agreement requires the manager to distribute all available cash monthly in accordance with each owner's percentage share, after trustee and manager fees and expenses and after the reserves the manager decides to hold.
Offering costs sit inside the price, so equity buys less than face value
The filed agreement applies investor cash first to the costs of selling the interests, capped in that document at 15 percent of the purchase price while the sponsor affiliate still holds interests, and then to redeem the affiliate. The memorandum price per interest therefore covers the property, the loan reserves and the load.
The result is that the total offering value, equity plus debt, is usually higher than the price the trust paid for the building. Your percentage is of the trust, not of the seller's price, which is why reading the fees and loads belongs in your review of any offering.
A worked example of the arithmetic
Hypothetical: a DST raises $20,000,000 of equity and carries a $25,000,000 loan, for a $45,000,000 total offering value. You buy $1,000,000 of interests at the memorandum price.
The fraction is fixed on the day you buy. Later loan amortization, a change in the building's value or a lower occupancy changes what the fraction is worth, not the fraction itself.
- Your percentage: $1,000,000 divided by $20,000,000 equals 5 percent.
- Your share of the loan: 5 percent of $25,000,000 equals $1,250,000.
- Your share of the offering value: 5 percent of $45,000,000 equals $2,250,000.
- Your loan-to-value share: $1,250,000 of $2,250,000, about 56 percent, the same as the trust's.
- If only $16,000,000 of equity sells, you still hold 5 percent; the sponsor affiliate keeps the unsold 20 percent. Run your own numbers with your CPA.
Form 8824 reports your share, not the whole trust
The Instructions for Form 8824 ask for the fair market value of the like-kind property received on line 16 and, in the boot computation on lines 15 and 18, the liabilities each side assumed, netted under Reg. section 1.1031(d)-2. For a DST, the property received is your percentage of the trust's real estate and the liability you took on is your percentage of its loan.
Ask the sponsor for a statement showing your percentage, your share of the purchase price and your share of the debt at your closing date. If you bought several DSTs, each one is listed and netted on the same return.
Related questions
Does my percentage change if the DST pays down its loan?
No. Principal payments reduce the trust's debt but not the fractions. Your share of the smaller loan balance shrinks in step with everyone else's.
Can the sponsor issue more interests later and dilute me?
Not after the offering closes. Rev. Rul. 2004-86 bars a qualifying trust from accepting additional contributions, and the filed trust agreement prohibits accepting new capital except to complete the original raise.
Why is my share of the property worth more than I paid in cash?
Because you also own a share of the loan-financed portion. In the hypothetical, $1,000,000 of equity carries $1,250,000 of debt, for a $2,250,000 share of the offering value.
Is my percentage the same as my share of each property in a multi-property DST?
Yes, if the trust has one class of investor interest, as Rev. Rul. 2004-86 requires: the fraction applies to every asset the trust holds. What you actually own is explained in the DST section.
Which number goes on my depreciation schedule?
Your basis in the DST, which carries over from the property you sold and is adjusted for boot and added debt. Your CPA allocates it using the percentage and the sponsor's purchase price allocation.
Sources
Checked against these publications on September 30, 2026. Rules and figures change; confirm the current version with your CPA or attorney before you act. This page is general information, not tax or legal advice.