WHAT IS A DEFERRED SALES TRUST?
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TOP 7 REASONS TO USE THE DEFERRED SALES TRUST AND NOT TO 1031 EXCHANGE
- Buy back into and back out of real estate, loan the funds for a business purpose such as real estate loan, buy into a business or develop RE at your own timing (all capital gains tax deferred, without having to follow any timing guidelines.)
- Net rental income: If you buy a property through the DST you don’t have to take the rental income. Instead, the income can be put back into the DST and invested in Stock, Bonds, Mutual Funds. This can lower your tax bracket potentially and you earn interest on the income you would have normally paid Uncle Sam.
- Partnership Interest: When a partnership or other ownership group sells an appreciated asset, they do not need to remain together to achieve tax deferral, as is typically the case with a 1031 Exchange. Each individual owner can have their own Deferred Sales Trust, the assets of which can be managed to each taxpayer’s own individual risk tolerance and preferences.
- A 1031 Exchange alternative or rescue (The Deferred Sale Trust has saved 7 failed 1031 exchanges in the past 90 days) Unlike a 1031 Exchange, the proceeds from the sale do not have to be invested in “like-kind” property in a very short time frame to achieve tax deferral. Moreover, a DST can be used to rescue a 1031 Exchange that is in danger of failing. Once the funds are in the DST the funds can be directed to a new LLC which can own, develop and run a business all while remaining tax-deferred in and out of the sale of the new property/business.
- Liquidity and Diversification: Convert an illiquid asset, like a business or commercial real estate, into a diversified portfolio of liquid investments. This can help reduce risk and volatility by preventing overexposure to a single asset class.
- Depreciation Schedule: resets when the property is purchased in partnership with a DST
- At the close of escrow, move funds outside of taxable estate to avoid the 40% estate tax on amounts over $11M single or $22M married couple.