Deferred Sales Trust (DST)
Legally defer your taxes 10+ years using DST
What if you could sell your assets and pay $0 in taxes?
You can, and you actually should.
As a business owner, commercial or residential real estate owner, or corporation, anyone would want to make as much money on the sales of their assets as they can. But sadly, they always have to deal with the Capital Gains Tax.
But here is a piece of good news:
With a Deferred Sales Trust (DST), you can defer your Capital Gains Tax completely and legally too.
Breaking it down…
The Capital Gains Tax is like that mischievous guy that’s not part of your business but is waiting by the side with hands open to get a share of your sales returns or profit. Capital gains rates are not fixed; they may rise and cost you up to 35 percent of your profit. That is quite a large chunk. You can do a lot with all of that for sure, but sadly, many people do not know about this heavy implication.
A Deferred Sales Trust (DST) is like spiderman, here to save you and make sure you keep your own money.
It leverages the Internal Revenue Code 453, a tax law that prevents taxpayers from paying taxes on money they haven’t yet received on an installment sale.
How Deferred Sales Trust (DST) works:
The process starts when property owners sell their property to a trust owned by a third-party company. The trust then sells the property or stock and “pays” you.
Rather than in cash, the payment is made with a payment contract known as an ‘installment contract.’ This contract promises to make payments to you over an agreed period. There are no taxes to the trust on the sale since the trust “purchased” the property from you for the same amount it sold it. The payment is made through the installment contract, which pays you over an agreed period.
The options on when and how the trust pays you can are flexible. You may have other income and not need the payment immediately. Until you start getting installment payments, the capital gains payment is not required by the tax code. However, the capital gains tax is paid to the IRS through an “installment plan” since only a portion of the capital gains tax is payable in proportion to the number of years specified in the installment agreement.
For over 20 years now, Deferred Sales Trust has allowed businesses and real estate investors to defer capital gains tax and generate more money through reinvestments in the long run, more than a direct and taxed sale.
The processes involved in a Deferred Sales Trust could be pretty technical and complicated. However, our expert team at Tax Goddess continues to help business, and real estate owners handle their Deferred Sales Trust operations.
Take advantage of our FREE tax-saving analysis of your event/sale by completing the form below.
For a FREE tax savings analysis on your event/sale please complete the form below
A member of our team will schedule a call with you to review the results of our analysis & to discuss if there is a more suitable or appropriate tax structure depending on your circumstance, so let’s start by taking a look at the details of your transaction!
FAQs & Most Common Questions
How can I know the amount of my payments from the trustee?
The payments are based on what you, the Seller/Taxpayer, arrange and pre-negotiate with the DST Trained and Approved Trustee. Depending on your income goals and other objectives, the amount and length of term of the installment sales note are your choice and subject to your 100% agreement.
What happens if I die?
With proper estate planning (i.e., by creating a Living Trust) scheduled installment note payments otherwise due to you can continue to pay to your legal heirs pursuant to the note term that you have chosen.
Are there any flexibilities or variability in the payment stream, such as increasing the payments over time?
Yes. The DST Trained and Approved Trustee, in his/her absolute discretion, may allow you to refinance your installment sales note in order to extend or shorten the note term or to provide you with payments (or greater payments) of principal (and should you decide to take an “interest only” note initially).
Can I cancel the whole deal after a few years and get my money?
If the DST Trained and Approved Trustee deems appropriate, He/She may elect to terminate the installment sales contract. However, you would immediately owe all the taxes, including all unpaid capital gains due from the original sale of the property/capital asset.
What happens if capital gain tax rates are changed after I set up the DST?
Politicians, from time to time, discuss changing capital gain rates. If that happens you would pay the new rate on the capital gains portion of your installment note payment. However, there is usually adequate notice to make a sound financial decision prior to any such change in taxation or tax rates.
Can I use my installment sales note to get back into real estate?
Yes, please contact the team or a duly qualified DST tax professional to discuss this option. We recommend that you work with Professional Advisers who are experienced in trust law, trust asset management and tax law as there are many situations that could “go wrong” if this is not implemented properly.
When the trust sells the property may I keep some of the cash from the sale?
Yes, in that case you would pay taxes only on the capital gain portion of the money which you kept for yourself outside the trust.
How can I have my tax adviser or attorney analyze the Deferred Sales Trust™ strategy?
For detailed technical information, have your CPA/attorney contact us for a full legal and tax cite package. The names Deferred Sale Trust™ and DST are common law trademarked names and are not found in the code. All of the legal and tax authority used in the DST are in the tax code, treasury regulations, cases, or rulings based upon the foundations found within the tax law.
How can I know the amount of my payments from the trustee?
The payments are based on what you, the Seller/Taxpayer, arrange and pre-negotiate with the DST Trained and Approved Trustee. Depending on your income goals and other objectives, the amount and length of term of the installment sales note are your choice and subject to your 100% agreement.
What are the fees involved with this type of strategy?
The fees involved depend on your particular situation (is this real estate? a business sale? crypto-currency sale?), but you can expect a minimum fee of 1.5% of DST assets as a one-time setup fee & .5% of DST assets/year.
I’m interested in finding out if this works for me. What should I do next?
It’s very easy! Your next step is to complete an “illustration request” on-line at: Request my Free DST analysis
Or, you can call and request a “free DST illustration” which will illustrate your particular facts and circumstances surrounding your potential sale as it relates to utilizing the DST. Once you have received the illustration summary, you can then review this information with a trust case manager and share this information with your CPA (if not Tax Goddess) or tax attorney for further review.