The short answer
A grantor letter is the annual statement a Delaware statutory trust's trustee sends each investor showing that investor's share of the trust's income, deductions and credits, so the investor can report them on their own return. It is the industry name for the grantor trust statement required by Reg. section 1.671-4, and it takes the place of the Schedule K-1 a partnership would issue. Because you are treated as owning your slice of the building directly, the rental items generally go on Schedule E, Part I.
At a glance
| Who sends it | The DST trustee, or a middleman such as a broker when the interest is held through one |
|---|---|
| Legal basis | The grantor trust statement rules in Reg. section 1.671-4, applied to DSTs through Rev. Rul. 2004-86 |
| Where it goes | Your share of rent and expenses goes on Schedule E, Part I, like any part interest in rental real estate |
| When it is due | By the trust's own return due date; March 15 when a widely held fixed investment trust reports through a middleman |
The letter exists because a DST is taxed as a grantor trust, not as a partnership.
In Rev. Rul. 2004-86 the IRS classified a properly limited Delaware statutory trust as an investment trust. Each investor is treated as a grantor and, by reason of section 677, as the owner of an aliquot portion of the trust, so all income, deductions and credits from that portion are included on the investor's own return. The ruling also holds that each investor owns an undivided fractional interest in the real estate itself, which is why a DST interest can be replacement property in a section 1031 exchange.
Grantor trust items are not reported by the trust on Form 1041. Reg. section 1.671-4(a) says they are shown on a separate statement instead. When a trust with two or more owners reports under the optional method in paragraph (b)(3), the trustee files Forms 1099 and furnishes each owner a statement that shows every item attributable to that owner's portion, gives the information needed to compute taxable income, and tells the owner those items must be included on the owner's return. That statement is the grantor letter.
Paragraph (d) of the same regulation sets the due date by cross-reference to section 6034A(a): on or before the date the trust's own return is required to be filed. The trustee must keep a copy for three years. If the trust is a widely held fixed investment trust and your interest sits with a broker or other middleman, Reg. section 1.671-5 requires the written tax information statement by March 15 of the following year.
A worked example shows why the letter, not your distributions, sets the taxable number.
Hypothetical: you own a 2% interest in a DST holding one apartment community. Your letter shows your share as $50,000 of rent, $18,000 of operating expenses and $12,000 of mortgage interest. Those figures go on Schedule E, Part I, which the Schedule E instructions direct a part owner of rental real estate to use for only that owner's share.
During the same year the trustee held back reserves and sent you $16,000 in cash. Your net before depreciation is still $20,000, because the letter reports what the trust earned and spent on your portion, not what it distributed. Depreciation follows your own basis in the interest, which after an exchange is the basis figured on line 25 of Form 8824 for the property you received. Treat these as rounded examples and confirm your own numbers with your CPA.
For a line-by-line read of a full statement, see DST tax forms and reporting. For what you actually hold behind the letter, see what you own in a DST.
The letter bites at filing time, in property states and in the year the trust sells.
Because the statement is due on the trust's return date rather than in January, a letter can arrive close to your own deadline. If yours is late, extending your own return is better than filing without it and amending later.
A portfolio DST owns buildings in more than one state, and the letter is the document that tells you which states produced income. That can mean nonresident filings, covered in DST multi-state tax issues.
In the year the trust sells its property, the letter reports your share of the sale. That is the year you decide between paying the tax and a new exchange, as described in DST sale and your next 1031.
Related questions
Is a grantor letter the same thing as a Schedule K-1?
No. A K-1 comes from a partnership or S corporation and goes in Part II of Schedule E, while grantor letter items from a DST are reported as your own part interest in rental real estate in Part I. The letter exists because the trust is a grantor trust rather than a partnership.
When should I expect my grantor letter?
The trustee must furnish it by the trust's own return due date under section 6034A(a). If the trust is a widely held fixed investment trust and a broker holds your interest, the middleman statement is due March 15.
What should I do if a figure on the letter looks wrong?
Ask the trustee or sponsor for a corrected statement before you file, since the regulation makes the items on it part of your own return. The trustee must keep a copy of each statement for three years, so the original can be checked.
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.