5 Deferred Sales Trust Factors Infographic

A Deferred Sales Trust (DST) is a powerful capital gains tax strategy that asset holders can use to defer paying capital gains taxes and maximize their investment returns. Setting up a qualified deferred sales trust involves several crucial steps. Firstly, the DST must be established as a legitimate third-party trust with all necessary legal documentation in place. The trustee managing the DST must be an independent third party, with no familial or business connections to the trust’s owner or beneficiary, ensuring impartiality and compliance with IRS regulations. The asset in question must be transferred to the trust before it is sold to a third-party buyer, meaning the trust must legally hold the asset at the time of the sale to enable the deferral of capital gains tax. Ownership or interest in the asset must be fully transferred to the trust, and only after this transfer can the trust proceed to sell the asset to a third-party buyer, triggering the capital gains tax deferral mechanism. One of the significant benefits of a DST is its flexibility in investment choices. The trust can reinvest the proceeds from the asset sale into a wide range of assets, providing diversification and potential for growth according to the trust’s investment strategy. By following these steps, asset holders can set up a qualified Deferred Sales Trust, deferring their capital gains taxes and maximizing the potential returns on their investments through strategic reinvestment.

source: https://capitalgainstaxsolutions.com/what-it-takes-to-qualify-for-a-deferred-sales-trust/


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