DST 2.0 – Deferred Sales Trust

It’s not a DST (Delaware Statutory Trust). We like to call it DST 2.0. A Deferred Sales Trust allows someone to sell a property or business and defer the proceeds using the IRS Installment Sale method to defer the capital gains over time, meanwhile investing the proceeds into a diversified investment portfolio and collect specified distributions over time. This strategy can also replace failing 1031s. 

For more information, contact us today! 

Gold Coast Financial Group 

Scott Brooks, Chief Investment Officer 

Phone: 949.545.6500 

Those of us who own businesses, corporations, and commercial or residential investment real estate assets are often reluctant to sell because of capital gains taxes associated with the sale. But what other choice do we have other than a property exchange directed by a Qualified Intermediary? Is there another way to deal with the capital gains tax deficits that so many investors experience when they sell their real estate assets? The answer may lie in the Deferred Sales Trust™. 

This capital gains tax deferral tool could save you thousands of dollars, and at the same time, you would then have the opportunity to potentially make a profit on the money you would have paid to Uncle Sam in the year of the sale. Obviously, this strategy is gaining popularity among those who have highly appreciated assets that are marked for sale. You too, can potentially take advantage of this program once you understand how it works. 

The process starts when a property owner sells their property to a trust owned by a third-party company. The trust sells the property or stock. Next, the trust “pays” you. The payment isn’t in cash, but with a payment contract called an “installment contract.” The contract promises to make payments to you over an agreed period of time. There are zero taxes to the trust on the sale since the trust “purchased” the property from you for what it sold it for. The payment is made with an installment contract which makes payments to you over an agreed period of time. 

The options on when and how payments can be made are flexible. You may have other income and don’t need the payments right away. The tax code doesn’t require payment of the capital gains until you start receiving installment payments. The capital gains tax is paid to the IRS with an “installment plan” since only that portion of capital gains is due in proportion to the number of years established in the term of the installment agreement. 

The Deferred Sales Trust™ has the potential to generate more money over the long run than a direct and taxed sale. 

There may be a more suitable or appropriate tax structure depending on your circumstance. We would like to have one of the Estate Planning Team’s tax specialists discuss your specific circumstances and goals with you. 

For a FREE tax savings analysis on a commercial or investment property, or a stock or a business you own, please complete the Request for Analysis. A member of Gold Coast Financial Group and the Estate Planning Team will contact you with the results. 

Disadvantages of the DST (Deferred Sales Trust) 

• Certain types of depreciation recapture is deferred. 
• Excess depreciation taken over straight line cannot be deferred. 
• Mortgage pay-off in excess of adjusted basis is not deferrable. 
• More complicated tax structure than other strategies. 
• Must adhere to the formalities imposed by Internal Revenue Service regulations 
• Fees to structure are often higher than strategies such as the 1031 exchange. 

Your right to receive the money will be from a trust in which the proceeds from the sale are reinvested in ways which may involve more or less risk, including fluctuating returns and possible loss of principal, depending on where the proceeds are reinvested.