Deferred Capital Gains

 A Deferred Sales Trust (DST) offers substantial value to owners of appreciated assets by providing a method to defer capital gains taxes upon sale. When an asset such as real estate, a business, or securities has significantly appreciated in value, selling it can result in a large capital gains tax liability. A DST allows asset owners to sell the asset and transfer the proceeds into a trust, deferring immediate tax payments and enabling the owner to reinvest the full amount of the sale proceeds.

 One of the primary benefits is financial flexibility. Instead of paying a large portion of the sale in taxes upfront, the funds in the trust can be reinvested in a wide range of assets, such as real estate, stocks, or other investment vehicles. This allows the proceeds to grow and compound, potentially generating more wealth than if they had been reduced by taxes at the point of sale.

Additionally, a DST can provide estate planning advantages. Asset owners can structure the trust to receive income over time, which can be used to support their retirement or passed on to heirs in a tax-efficient manner. The flexibility in controlling when and how distributions are made helps with long-term financial planning.

For owners of appreciated assets, the DST offers a valuable alternative to traditional capital gains strategies, such as the 1031 exchange. While 1031 exchanges are limited to real estate transactions, the DST can be used with a wider variety of assets, providing owners with greater flexibility and control over their wealth management and tax strategies.

 1031 exchanges are restricted to real estate exchanges and the replacement property must be of equal or greater value. A new property must be identified in 45 days and you must close within 180 days of the close of the first sale. In addition, if a Taxpayer exchanges with a related party, then the party who acquired the property in the exchange must hold it for 2 years or the exchange will be disallowed. 

A DST, on the other hand, allows the proceeds to flow into the DST, where they can be invested in a wide range of assets, such as real estate, stocks, or other investment vehicles. This allows an investor who has built up capital gains through multiple 1031 exchanges to diversify their investments or wait to reinvest in real estate. A DST provides much greater flexibility and alternative investments.