Deferred Sales Trust | 1031 exchange alternative
Don't let the capital gains alligator bite you.
Owners of businesses, real estate and other highly appreciated assets are often reluctant to sell because of the capital gains tax that can result. The Deferred Sales Trust may defer that tax, so more capital is potentially available to invest.
- Based on IRC Section 453, the installment sale
- No 45 day or 180 day 1031 deadlines
- No upfront retainer to have your case reviewed
Who it is for
Selling something that has grown a lot in value?
Rather than experiencing the drain of equity that results from a fully taxable sale, the Deferred Sales Trust lets a seller potentially invest the pre-tax proceeds from the sale. It can be used on the sale of almost any type of highly appreciated asset, including:
- Businesses and professional practices
- Commercial real estate
- Investment properties
- High end primary residences
- Major stock positions
- Valuable artwork and collectibles
The idea in one minute
Sell to a trust. Get paid over time. Pay tax as principal arrives.
A Deferred Sales Trust is a tax deferral strategy built on an installment sale, sometimes called a seller carry back. Instead of taking the sale proceeds directly, the seller sells the asset to a trust in exchange for a promissory note, and the trust pays the seller over time.
1. Your asset goes to the trust
Ownership of the appreciated asset is transferred to a dedicated trust, which then sells it to the buyer.
2. You become the noteholder
The trust makes the agreed upon payments to you under an installment sales contract, representing interest, principal, or both.
3. Tax follows principal
The tax code does not require payment of the capital gains tax until the seller starts receiving payments of principal.
Versus a 1031 exchange
A flexible 1031 exchange alternative
A Deferred Sales Trust does not carry the main 1031 exchange requirements:
- No 45 day identification deadline or 180 day closing deadline
- No like-kind replacement property requirement
- No requirement to replace the same equity or debt
Honest about both sides
Potential benefits, and real risks
Tax deferral, diversification, potential retirement income and flexible payments are potential benefits, not guaranteed results. IRS challenge, trustee default, investment losses, limited liquidity and fees are real risks worth weighing.
Read benefits and risks
Your guide
Michael Conte, MBA (USC)
Real Estate Consultant and a member of Estate Planning Team, the membership organization whose professionals offer the Deferred Sales Trust together with experienced, specialized attorneys.
Michael starts with a conversation about your sale. If a Deferred Sales Trust may fit, an experienced DST attorney, trustee and case manager review your case, and your own tax and legal advisors are welcome to join the call.
Prefer we call you?
Tell Michael a little about your sale
Share the basics and Michael will reach out to set up an introductory call. There is no upfront cost or obligation to have your case reviewed.
- Phone: 415-314-8800
- Email: mconte@sbcglobal.net
- Or book directly: pick a time on Michael's calendar
See whether a Deferred Sales Trust may fit your sale
An introductory call explains the structure and answers your questions. Your own tax and legal advisors are welcome to join.