“Farmland has never been worth more. Farming has rarely been harder to profit from. That gap is the whole story, and it is the reason Fortitude spends as much time with landowners now as we do with commercial sellers.”

- Daniel P. Raupp, Co-Founder and Managing Partner, Fortitude Investment Group LLC

Key takeaways

• Cropland averaged $6,020 an acre in 2026 while cash rent averaged $160, a gross yield near 2.7 percent and a net yield often near 2 percent.
• More than 150 million acres of U.S. farmland is expected to change hands in the next 10 to 20 years, and 79 percent of rented acres are already owned by non-operating landlords.
• A DST is already assembled, financed and closed by the sponsor, which is what makes it workable inside a 45-day identification window.
• Only real property qualifies after the Tax Cuts and Jobs Act. Equipment, livestock and stored crops are taxed at closing.
• The farmhouse is handled separately: Section 121 on the residence first, Section 1031 on the balance, per Revenue Procedure 2005-14.
• The tradeoffs are real: total loss of control under the seven deadly sins, illiquidity, fees, unguaranteed distributions, and the fact that you stop owning farmland.
• Roughly 60 percent of the current DST market is 721 UPREIT programs. Know which kind you are buying, because an UPREIT ends future 1031 flexibility.

There is a conversation happening at kitchen tables from the Central Valley to the Delmarva Peninsula, and it usually starts the same way: “The ground has never been worth more. So why can't we make a living off it?”

That question sits at the heart of one of the strangest moments in modern American agriculture. Farmland has never been more valuable. Farming has rarely been harder to profit from. And for a growing number of landowners, especially those in their sixties, seventies, and beyond, the gap between those two facts is becoming impossible to ignore. For some of them, a Section 1031 exchange into a Delaware Statutory Trust is turning out to be the tool that closes it.

Why is farmland worth more than ever while producing less income?

Because land is being priced by investors, developers, solar operators and data center builders, while it is being rented by farmers working on single-digit margins. Those are two different markets setting two different numbers on the same acre.

USDA's National Agricultural Statistics Service released its 2026 Land Values Summary on July 31, and it confirmed what landowners already suspected. The average value of U.S. cropland topped $6,000 an acre for the first time on record, landing at $6,020, up 3.3 percent from 2025. Pastureland crossed $2,000 an acre. All farm real estate, land and buildings combined, averaged $4,500 an acre, the sixth straight annual increase and nearly 44 percent above 2020 levels.

Regionally, the numbers get bigger fast. The Corn Belt, meaning Illinois, Indiana, Iowa, Missouri and Ohio, averaged $8,590 an acre. The Pacific region averaged $8,440, with California farm real estate at roughly $14,100 an acre. In the Northeast, Connecticut runs about $14,600 and Rhode Island pastureland reaches $17,500.

Now look at the income side. USDA's Economic Research Service forecasts 2026 net farm income at $153.4 billion, down slightly from 2025. But the composition matters more than the headline. Total cash receipts are projected to fall to $514.7 billion, and government payments are forecast to jump more than 45 percent to roughly $44.3 billion, approaching a third of total net farm income. Crop receipts rise about 1.2 percent in nominal terms but decline after inflation. Analysts at the University of Minnesota Extension and elsewhere have noted that projected crop profit margins are the poorest since the 2016 to 2020 stretch.

Then there is the number that really tells the story. National average cropland cash rent in 2026 came in at $160 an acre, down a dollar from last year.

A landowner sitting on $3 million of Iowa or Illinois ground may be collecting $60,000 to $75,000 a year before expenses, on an asset that would generate a seven-figure tax bill if sold outright. That is the definition of land rich and cash poor.

Who actually owns the farmland that is about to change hands?

Mostly people who do not farm it. Retired farmers, surviving spouses and heirs own 79 percent of all rented acres, and the average non-operating landlord is closer to 69 years old.

“More than 150 million acres will change hands over the next twenty years. Most of those families have not had the conversation yet.”
- Daniel P. Raupp, Fortitude Investment Group

The American Farmland Trust estimates that more than 40 percent of U.S. farmland, over 150 million acres, will change hands at least once in the next 10 to 20 years. The average U.S. producer is now over 58. The average non-operating landlord is closer to 69, and more than a third of them are 75 or older.

USDA's 2024 Tenure, Ownership, and Transition of Agricultural Land survey found that over 2 million landowners rent out 348 million acres, and that 79 percent of rented acres are owned by non-operating landlords: retired farmers, surviving spouses, and heirs who do not work the ground.

That is the pool of people for whom the 1031-into-DST conversation is most relevant. Not the 45-year-old expanding operator. The 72-year-old widow in Story County whose husband farmed until 2019 and who now deals with three tenants, two drainage districts, and a set of heirs scattered across four states.

What is a 1031 exchange into a DST, in plain terms?

Section 1031 lets you sell investment real property and reinvest into other like-kind real property without paying tax at closing. A Delaware Statutory Trust is a passive, already-assembled replacement property that qualifies under Revenue Ruling 2004-86.

Section 1031 of the Internal Revenue Code lets an owner of investment or business-use real property sell it and reinvest the proceeds into other like-kind real property, deferring federal capital gains tax and depreciation recapture. The definition of like-kind for real estate is famously broad: farmland is like-kind to an apartment building, an industrial warehouse, a medical office, or raw land.

A Delaware Statutory Trust is a trust formed under Delaware law that holds title to institutional-grade real estate. A sponsor acquires the property, and accredited investors purchase fractional beneficial interests in the trust. Under IRS Revenue Ruling 2004-86, those beneficial interests are treated as direct ownership of real property for tax purposes, which makes them valid 1031 replacement property.

The practical appeal is timing. A 1031 exchange gives you 45 days to identify replacement property and 180 days to close. Finding, negotiating, inspecting, and financing a comparable farm or commercial building inside 45 days is genuinely difficult. A DST is already assembled, already financed, already closed by the sponsor. You can subscribe in days rather than months.

The market has noticed. Mountain Dell Consulting reports that DST sponsors raised roughly $8.41 billion in 2025, a 49 percent jump over 2024. Through July 2026, the industry had raised about $5.5 billion, up 31 percent year over year, with $985 million in July alone, and is on pace to top $10 billion and surpass the previous $9.4 billion peak. As of mid-July there were 59 active sponsors offering 110 programs, up at least a third from a year earlier, with industrial at 31 percent and multifamily at 28 percent the most available asset types. Blackstone, Ares, Hines, Blue Owl, Nuveen, JLL, and Fortress have all entered the space. This is no longer a cottage industry.

Where does this math actually work? Six situations across the country

The pattern repeats wherever land value has decoupled from farm income: idle orchards, absentee inheritances, development-edge acreage, solar and data center offers, recreational ranches, and fractured estates.

The following are illustrative composites drawn from common regional fact patterns, not descriptions of specific clients or transactions. Numbers are hypothetical and used to show the structure of the decision.

Case study 1: The idle orchard, Central Valley, California

This is the case that makes the argument most clearly.

Picture an 80-acre almond block in Madera or Kings County, planted in the mid-1990s, purchased by the grower's father in 1978 for around $1,200 an acre. By 2023 the trees were past peak production, replant costs had climbed, and the grower's water district, operating under a Groundwater Sustainability Plan mandated by SGMA, cut his allocation and imposed pumping assessments on acreage he was still irrigating.

He pushed the trees. And then the ground sat. For three years that parcel generated exactly zero income. No crop. No lease, because nobody wanted to rent orchard ground with an uncertain water allocation. Meanwhile he paid property taxes, weed abatement, and district assessments every year. He was writing checks to own an asset that had appreciated to roughly $1.6 million and produced nothing.

Instead of selling outright, the proceeds went to a qualified intermediary and into four separate DST interests: a Midwest industrial distribution portfolio, a Sunbelt multifamily property, a portfolio of net-leased medical clinics, and a self-storage program in the Southeast.

The result: no immediate tax, monthly distributions replacing zero income, four asset classes instead of one crop, four geographies instead of one water district, and no more 5 a.m. calls about a broken pump. He went from paying to own dirt to receiving mailbox money on the full pre-tax value of that dirt.

That last point deserves emphasis. By deferring, he put roughly $1.6 million to work rather than roughly $1.2 million. The deferred tax is still working for him, not for the Treasury. It has not gone away, and it travels into the replacement property.

Case study 2: The absentee landlord, McLean County, Illinois

Corn Belt farm real estate averages $8,590 an acre. A retired schoolteacher who inherited 240 acres from her parents in 1998 collects cash rent that, after property taxes and farm management fees, nets her a bit over 2 percent. She has never operated the ground and never will. Her two children live in Denver and Charlotte.

An exchange into a diversified set of DSTs converts a single-tenant, single-crop, single-county asset into professionally managed commercial real estate, while preserving the ability to pass the interests to her heirs with a step-up in basis at death, which is what makes 1031 deferral potentially permanent and a genuine estate planning tool.

Case study 3: The development-edge farm, Rutherford County, Tennessee

Tennessee posted the largest percentage increase in cropland value of any state in the 2026 USDA report, rising 5.8 percent to $6,400 an acre. On the fringes of Nashville's growth corridor, farmland is being priced by developers, not by corn yields.

A family farming 300 acres at the edge of that path faces a genuine choice: keep farming ground worth ten times what it can earn agriculturally, or monetize. A 1031 lets them do the second without a tax event, and many families split the difference, selling the development-pressured half-section and exchanging into DSTs while continuing to farm their remaining acres with the equipment they already own.

Case study 4: The solar and data center offer, eastern Nebraska

Nebraska cropland averages $6,960 an acre. Utility-scale solar developers and data center operators are writing checks well above that for parcels near transmission infrastructure. A landowner who accepts an outright sale at, say, $12,000 an acre on 160 acres realizes a large gain on ground his family bought in the 1960s.

Section 1031 applies to that sale exactly as it would to any other. The proceeds can move into DSTs, including industrial and data-center-adjacent DST programs, which lets a landowner stay exposed to the same secular trend that made his ground valuable in the first place, without concentrating in one parcel.

Case study 5: The recreational ranch, Texas Hill Country

Hill Country ranchland trades on scenery, hunting, and proximity to Austin and San Antonio far more than on stocking rates. An owner running a handful of cows for an ag valuation may net a few thousand dollars a year on land worth millions.

Here, too, the property is valuable and the income is effectively nil. The 1031-into-DST conversion turns a scenery asset into a cash-flow asset. The tradeoff is real: you give up the recreational use and the emotional attachment. Some families exchange a portion and keep the headquarters tract.

Case study 6: The fractured inheritance, North Dakota

North Dakota cropland runs about $2,800 an acre. When a quarter-section passes to five heirs, you get a governance problem: one sibling wants to keep the tenant, one wants to sell to a solar developer, one wants a trust.

Because DST interests can be purchased in relatively small increments, often with minimums around $100,000, some families sell the land and let each heir direct their share into their own exchange and their own DST allocation. Each person gets liquidity of decision without forcing a fire sale on the others.

Structuring this correctly is genuinely technical. The entity holding title, the timing of any partnership division, and each heir's holding period all matter enormously. This is drop-everything-and-call-your-tax-attorney territory, and it is the single most common place a farm exchange falls apart.

The scenario above is a composite illustration assembled from situations Fortitude has worked on. It does not describe any single client or transaction, the figures are hypothetical and rounded, and it is not a prediction, a projection, a guarantee of results, or a recommendation to buy or sell any security. Individual outcomes depend entirely on facts specific to the taxpayer.

Which farm-specific rules trip people up?

A farm sale is really several sales bundled into one closing, and the allocation between them decides how much can be exchanged and how much is taxed on the spot.

Agricultural exchanges are more complicated than exchanging one apartment building for another. Five rules do most of the damage.

• Only real property qualifies. Since the Tax Cuts and Jobs Act of 2017, Section 1031 applies to real property only. Equipment, livestock, harvested crops, and other Section 1245 personal property no longer qualify and will trigger tax at closing.
• The line between 1245 and 1250 property is worth real money. Affixed irrigation infrastructure, meaning center pivots, pumps, filters and buried supply pipe, is generally treated as a real property improvement. Portable water wheels and similar equipment generally are not. Grain bins, silos, and single-purpose agricultural structures raise depreciation recapture questions, and Section 1245 recapture is taxed at ordinary income rates and cannot be deferred without acquiring replacement property of the same character.
• The farmhouse is separate. If you live in it, it is a primary residence and does not qualify for 1031 treatment. Revenue Procedure 2005-14 addresses exactly this mixed-use situation: apply the Section 121 exclusion first to the residence, up to $250,000 of gain single or $500,000 married filing jointly, and Section 1031 to the balance held for business or investment. A tenant-occupied or caretaker house, by contrast, is investment property and can go into the exchange.
• Allocate carefully, and use separate settlement statements. The cleanest closings produce one statement for the residence, one for the exchanged real property, and one for personal property. The 1031 exchange agreements should not include the residence.
• Replace both equity and debt. If your farm carried a mortgage, you generally need to replace that debt, or add cash, or you will recognize boot. DSTs with pre-arranged non-recourse debt at a matching loan-to-value are one of the more common ways to solve this cleanly, and zero-coupon DST structures exist specifically for high-leverage situations.

And the clock is unforgiving. Forty-five days to identify, 180 days to close, no extensions except in declared disasters. The qualified intermediary must be engaged before closing. If the proceeds touch your bank account, the exchange is dead. The full set of 1031 exchange rules and requirements is worth reviewing well before a closing date is set.

What is the honest case against a DST?

You lose control entirely, you cannot get your money back on your own schedule, the fees are real, the distributions are projections, and you stop owning farmland. Read this section twice.

Nobody is well served by a one-sided pitch. DSTs solve real problems and create new ones. It is worth reading the full risks of a 1031 exchange alongside the points below.

• You lose control entirely. Revenue Ruling 2004-86 imposes what the industry calls the seven deadly sins: no new capital contributions after closing, no refinancing or renegotiating the loan, no new or modified leases except in tenant insolvency or bankruptcy, no reinvestment of sale proceeds, capital expenditures limited to normal repair and maintenance, reserves held in short-term instruments, and all cash less reserves distributed at least quarterly. If the roof fails, the trust pays from operating cash. It cannot borrow. If the anchor tenant leaves, the trust's flexibility is severely constrained. A farmer used to making every decision on his own ground will find this jarring.
• They are illiquid. There is no meaningful secondary market. Typical hold periods run five to ten years, and the sponsor decides when to sell, not you. If you need your principal back in year three, you have a problem.
• Fees are meaningful. Load, acquisition fees, asset management fees, and disposition fees all reduce net returns relative to owning property directly. Ask for the full fee table and the projected-versus-actual track record on prior programs from the same sponsor.
• Distributions are projections, not guarantees. Sponsors publish projected first-year distribution rates. They are estimates, they can be cut, and some programs have cut them. Historical performance of prior offerings tells you more than the pro forma, and past performance does not guarantee future results.
• Sponsor quality varies widely. With 59 sponsors and 110 offerings in the market and average time-on-market down 45 percent year over year, capital is moving fast. Fast-moving capital is not always careful capital.
• You must be an accredited investor. Generally $200,000 of individual income, or $300,000 joint, for the past two years, or $1 million net worth excluding your primary residence.
• Exit is not automatic. When a DST sells, you can typically do another 1031 into a new DST or other real property. But roughly 60 percent of the current market consists of 721 UPREIT programs, which convert your interest into operating partnership units in a REIT. That is a one-way door. Once you are in a REIT structure, future 1031 exchanges are generally off the table. Know which kind you are buying.
• Legislative risk is real. The FY 2025 Treasury Green Book proposed capping 1031 deferral at $500,000 per taxpayer, or $1 million joint, per year. No change has been enacted, and Section 1031 has survived many such proposals. But the provision is periodically targeted, and anyone planning around it over a decade should assume the rules could change.
• And the deepest one: you stop owning farmland. Farmland has been a remarkable long-term real asset, up nearly 44 percent since 2020, resilient through commodity downturns, limited in supply, and a hedge against inflation that commercial real estate does not replicate. Trading it for institutional commercial real estate is a genuine change in the risk you own, not just the management burden.

What are the alternatives to a DST?

Seven, and a responsible conversation puts all of them on the table before anyone signs a subscription agreement.

• Keep the land and improve the lease. Flexible cash rent or crop-share arrangements, or professional farm management, can raise net yield without any tax event.
• Exchange into a triple-net-leased property or another farm. You stay in direct ownership with a single tenant and far less management.
• Installment sale under Section 453. Spreads the gain over years, though with credit risk to the buyer.
• Charitable remainder trust. Income for life plus a deduction, if charitable intent is genuine.
• Conservation easement. Immediate liquidity and estate value reduction while keeping agricultural use.
• Opportunity Zone fund. Different deferral mechanics, different timelines, and available for gains beyond real estate.
• Do nothing and hold to death. The step-up in basis eliminates the capital gains problem for heirs entirely, assuming the estate tax picture works and the family can live with the low current yield in the meantime.

What should you ask before you sign anything?

Eight questions, and the first two are arithmetic you should have in hand before you take a single sponsor meeting.

1. What is my actual basis, and what would the full tax bill be, meaning federal capital gains, net investment income tax, depreciation recapture, and state tax, on an outright sale?
2. What is my current net cash yield on this ground, after taxes, insurance, assessments, and management?
3. Do I need this capital to be accessible in the next ten years?
4. What is this sponsor's track record on prior programs, realized rather than projected?
5. Is this a traditional DST or a 721 UPREIT program, and do I want to preserve future 1031 flexibility?
6. How many DSTs, across how many asset classes and geographies, does my exchange amount support?
7. What happens to these interests when I die, and does that fit the estate plan I already have?
8. Have my CPA, my estate attorney, and my qualified intermediary all seen this before I commit?

The bottom line

For the right owner, at the right stage of life, with the right advisors at the table, a 1031 exchange into DSTs is one of the few tools in American tax law that lets you take the harvest without selling the farm. For the wrong owner it is an illiquid, irreversible mistake.

American farmland is worth more than it has ever been, and for a large and aging cohort of owners it is producing less usable income than at almost any point in living memory. That is not a temporary dislocation. It is a structural feature of a market where land is priced by investors, developers, solar operators, and data center builders, and rented by farmers working on margins measured in single-digit percentages.

Section 1031 has been in the tax code since 1921 for a reason: it lets capital move to a higher and better use without a toll booth in the middle. For the almond grower whose orchard sat idle for three years, that meant converting a beautiful, expensive, unproductive asset into diversified income without handing over a third of a lifetime's appreciation.

It is not the right answer for everyone. It is a permanent change in what you own, it is illiquid, and it means giving up control of ground your family may have held for a century. Fortitude works alongside the CPA, the estate attorney and the qualified intermediary rather than around them, and the conversation worth having is the one before the ground goes under contract.

Frequently asked questions

Can you 1031 exchange farmland into a Delaware Statutory Trust?

Yes. Farmland held for investment or productive use in a trade or business is like-kind to virtually any other U.S. real property, and under IRS Revenue Ruling 2004-86 a beneficial interest in a properly structured Delaware Statutory Trust is treated as direct ownership of real property. DST interests are private placements available only to accredited investors and are illiquid.

What happens to my farm equipment, livestock and stored crops in a 1031 exchange?

They do not qualify. Since the Tax Cuts and Jobs Act of 2017, Section 1031 applies to real property only. Equipment, livestock, harvested crops and other Section 1245 personal property are taxed at closing, and Section 1245 recapture is taxed at ordinary income rates rather than capital gain rates.

Is my farmhouse part of the exchange?

Not if you live in it. A primary residence does not qualify for 1031 treatment. Revenue Procedure 2005-14 handles the mixed-use situation by applying the Section 121 exclusion to the residence first, up to $250,000 of gain single or $500,000 married filing jointly, and Section 1031 to the balance held for business or investment. A tenant-occupied or caretaker house is investment property and can go into the exchange.

Are center pivots and grain bins real property or personal property?

It depends on the item and it is worth real money. Affixed irrigation infrastructure such as center pivots, pumps, filters and buried supply pipe is generally treated as a real property improvement. Portable equipment generally is not. Grain bins, silos and single-purpose agricultural structures raise depreciation recapture questions that should be resolved with a CPA before the closing statement is drafted.

What is the current yield on cash-rented cropland?

National average cropland cash rent in 2026 was $160 an acre against an average cropland value of $6,020 an acre, a gross yield of roughly 2.7 percent. After property taxes, drainage assessments, insurance and management, many landowners net closer to 2 percent.

Does a 1031 exchange eliminate the tax on a farm sale?

No. It defers capital gain and depreciation recapture into the replacement property. If that replacement property is later sold without another exchange, the deferred liability becomes due. Under current law, positions still held at death may receive a step-up in basis for heirs, which is how the deferral can become permanent for the next generation.

What is the difference between a traditional DST and a 721 UPREIT program?

A traditional DST can be exchanged again under Section 1031 when the sponsor sells. A 721 UPREIT program converts the interest into operating partnership units in a REIT, which permanently ends the ability to do a future 1031 exchange with that capital. Roughly 60 percent of the current DST market consists of 721 UPREIT programs, so confirm which structure an offering uses before subscribing.

How can five heirs each go a different direction with one inherited quarter-section?

Because DST interests are fractional and can often be purchased in increments around $100,000, some families sell the land and let each heir direct their own share into their own exchange and their own allocation. The structuring is technical: the entity holding title, the timing of any partnership division, and each heir's holding period all matter, and this is a question for a tax attorney well before a contract exists.

How far ahead should a landowner start planning?

Well before the ground goes under contract. The qualified intermediary must be engaged before closing, and the allocation between real property, personal property and the residence is far easier to get right in the purchase agreement than after the fact. Once proceeds touch the landowner's bank account, the exchange is no longer available. Terms worth knowing are collected in the 1031 glossary.

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This article is for educational purposes only and is not tax, legal, or investment advice. DST investments are available only to accredited investors, involve substantial risk including possible loss of principal, are illiquid, and are subject to fees and expenses that reduce returns. Distributions are not guaranteed. Past performance does not indicate future results. Section 1031 exchanges are complex and subject to strict deadlines; a failed exchange results in full taxation of the gain. Tax law may change. All examples in this article are hypothetical composites for illustration only and do not represent actual clients, transactions, or results. Consult your own CPA, attorney, and qualified intermediary regarding your specific circumstances.

References to third party sponsors and transactions are drawn from publicly reported information and are provided solely to describe general market conditions. They are not endorsements of, or statements about, any company, sponsor or investment.

Sources: USDA NASS, Land Values 2026 Summary (July 31, 2026); USDA NASS, 2024 Tenure, Ownership, and Transition of Agricultural Land (TOTAL); USDA Economic Research Service, Farm Sector Income and Finances (Feb. 5, 2026 forecast); American Farm Bureau Federation; American Farmland Trust; Mountain Dell Consulting via AltsWire (July 2026 DST fundraising data); IRS Revenue Ruling 2004-86; IRS Revenue Procedure 2005-14; IRC Sections 121, 453, 1031, 1245, 1250.

Securities offered through Concorde Investment Services, LLC (CIS), member FINRA/SIPC. Advisory services offered through Concorde Asset Management, LLC (CAM), an SEC registered investment adviser. Fortitude Investment Group is independent of CIS and CAM.

This material is for informational purposes only and is not an offer to buy or sell any security or investment product. Past performance does not guarantee future results. All investments involve risk, including possible loss of principal. Consult your tax, legal, and financial advisors before making investment decisions.