1031 vs 721 UPREIT Exchange Comparison Calculator
Compare 1031 like-kind exchange versus 721 UPREIT roll-up. Models gain deferral, liquidity timing, exit step-up, and ongoing management for each path.
| Gain Realized at Sale | — |
| Tax Avoided (Both Paths) | — |
| 1031 Annual Net Cash Flow (cap rate × equity - mgmt) | — |
| 721 Annual Distributions (yield × equity value) | — |
| 1031 Year-N Total Cash Received | — |
| 721 Year-N Total Cash + Appreciation | — |
| Liquidity (after holding period) | — |
| Step-Up at Death (Both Paths) | — |
§1031 like-kind exchange swaps real estate for real estate to defer gains. §721 UPREIT exchange contributes property to a REIT's Operating Partnership (OP) in return for OP units — also defers gains while gaining REIT diversification and liquidity (after holding period). Many DST sponsors structure exits as 721 UPREITs into public REITs. Source: IRC §1031, §721, NAREIT 2026 Guide.
How 1031 and 721 UPREIT Differ
§1031 exchanges real estate for real estate — you keep direct ownership, full depreciation, leverage, and control. §721 contributes real estate to a REIT's Operating Partnership in exchange for OP units. The exchange is tax-deferred, but you give up direct ownership and active management. OP units are convertible to publicly-traded REIT shares after a holding period (typically 12-24 months).
When to Choose 721 UPREIT Over 1031
Choose 721 if: (1) you are aging out of active landlording, (2) you want geographic/asset diversification, (3) you need easier estate planning (units divide cleaner than buildings), (4) you want eventual liquidity without another 1031. Choose 1031 if: (1) you want to keep depreciation and leverage, (2) you have strong local market expertise, (3) you want full control over operations.
DST to 721 UPREIT Combo
Many investors use a Delaware Statutory Trust (DST) as an intermediate 1031 replacement, then convert DST interests into 721 OP units at the sponsor's exit event. This combo provides passive ownership immediately (DST) plus liquid REIT shares later (721). The combo is popular for retirees who want to fully exit active real estate without triggering capital gains.
Last updated May 2026. Sources: IRC §721 & §1031, NAREIT 2026 UPREIT Guide.