Considering a Deferred Sales Trust to defer capital gain tax on the sale of your agricultural assets?
Did you know there’s an alternative that lets you obtain cash when you sell while deferring your capital gain for 30 years?
Learn why DSTs may not be your best capital gain deferral option, and what to do instead.
A Tax-Deferred Installment Sale includes the sale of an appreciated asset in exchange for an installment agreement, which defers capital gains tax under IRS Sec. 453. The Installment Sales Agreement and future payments received on this note are then used to secure, tax-free loan, providing cash at closing equivalent to 93.5% of the net sales proceeds.
A Deferred Sales Trust is a term used to describe a sale and investment arrangement in which an appreciated asset such as a business or real estate is sold in an installment sale by a trust which the owner of the asset causes to be formed. The sales proceeds then are invested and managed by the trust. Distributions to the seller from the trust are taxable to the extent that they include return of principal.
Repayment terms vary and taxable as principal is distributed
100% for 30 years
Limited
93.5% of sale proceeds immediately available in non-taxable cash
All funds are managed by Trustee and Investment manager
Funds completely controlled by seller unfettered
Trust Manager, Investment Manager
None
Up Front Cost: 1.5% to 2.0%
Ongoing Cost: Generally 1.5%
Up Front Cost: 6.5%
Ongoing Cost: $300 Annually
Generally, 1.5% annually for the trustee and investment manager
$300 annual escrow fee
Compliance rules and legal restrictions
None
415 Advisors is not an accounting or law firm.
No information provided on this website is intended as individual tax advice.
Consult with a qualified tax adviser before acting on any of the information provided on this site.
Notice: Internal Revenue Service regulations provide a taxpayer may rely only on formal written advice to comply with IRS regulations. We advise you that any discussion of Federal tax issues contained on this website is not intended to be used (and cannot be used) by any taxpayer for the purpose of avoiding penalties or to promote, market, or recommend to another party any tax-related matters that may be imposed under the Internal Revenue Code as it does not meet those requirements of formal written advice. All interested parties are advised to seek qualified legal counsel to determine whether this transaction structure is suitable for their individual situation and risk tolerance. We can provide referrals to CPAs and tax attorneys who are experienced in this specific area.