Sell Smart. Defer Capital Gains Tax.

A Deferred Sales Trust is a smart and legal way to defer capital gains tax and reduce the overall tax burden on the sale of a business, real estate, high-value collectables, crypto currency or highly concentrated stock positions.

The process starts with an owner wishing to sell their asset. The Seller will typically follow traditional methods including hiring professional agents or brokers to market the asset to interested buyers.

During the marketing period or shortly after an offer has been accepted, and provided that the Deferred Sales Trust transaction is feasible, our tax attorneys will create a specialized trust whose purpose is to conduct business with the Seller. The Deferred Sales Trust Tax Attorney will coordinate with the Seller and the parties managing the sales transaction to prepare the way for the Seller to defer the taxes on the sale.

Just prior to the close of the sale, the Seller may make a binding decision to transfer their rights, title and interest in the asset to the trust.

During the final closing, the designated buyer will receive the asset, the Seller’s Deferred Sales Trust will receive the proceeds of sale and the Seller will receive a secured installment contract (or promissory note). In this way, the Seller can report the sale for tax purposes as an installment sale.

Advantages of a Deferred Sales Trust:

• Tax Deferral. When the appreciated property or capital assets are sold, capital gains tax on the sale is generally deferred until the Seller (Taxpayer) actually receives the payments.

• 1031 Exchange Alternative. A Deferred Sales Trust offers an alternative to a 1031 exchange, providing more investment options without the like-kind reinvestment conditions and timeline restrictions.

• 1031 Exchange Rescue. In the case of a 1031 transaction, the investor’s sale proceeds from an asset’s disposition go to a qualified intermediary (QI). The QI holds these proceeds on behalf of the investor to close on a replacement property to complete the investor’s tax-deferred exchange. Should the exchange fail, whereby the funds cannot be reinvested into a property according to IRS guidelines, the funds held at the QI are subject to capital gains and depreciation recapture taxes once released from the QI to the investor. The Deferred Sales Trust provides a ready solution to this problem by allowing the funds to revert to a trust rather than the investor.

• Retirement Income. Provides a stream of income that can be used as retirement income.

• Estate Tax Benefits. May accomplish an “estate tax freeze” for estate tax purposes.

• Maintain Wealth. When properly structured, the principal inside the subject installment sales note can be preserved with “interest only” or partial principal payments creating the potential to pass on a large portion of the note principal to your legal heirs with proper estate planning.

• Eliminates Risks Associated with Ownership. By utilizing the DST installment arrangement, you can convert the collateral security for your payments from an asset that is otherwise “exposed” or liability-prone (e.g. your old business or property) to a “no-liability” asset (such as diversified financial instruments).

See if a Deferred Sales Trust can benefit you. Call now (424) 835-4500 to learn more.