Given that most mergers and acquisitions involve a large company, you likely have many tax considerations when another company wishes to merge with yours or to acquire yours. One of your most pressing needs likely is a strategy whereby you can defer the capital gains you undoubtedly will face when your company merges with another company or agrees to be acquired by it. This is where a Deferred Sales Trust can save you hundreds of thousands of dollars in taxes while allowing you to diversify your overall investment portfolio.
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The Deferred Sales Trust vs. a Conventional Installment Sale
You likely already know that Section 453 of the Internal Revenue Code authorizes you to sell your highly appreciated asset by means of an installment sale, thereby allowing you to defer your capital gains taxes. You may also know that a Deferred Sales Trust is a special proprietary type of installment sale. But have you ever compared the two head-to-head to determine which offers you more advantages? If not, read on. You’re in for a very pleasant surprise!
Hypothetical Scenario: State Capital Gains Tax vs No State Capital Gains Tax
As an investor, you’re all too familiar with the way in which capital gains taxes can eat up a substantial portion of your profit when you sell a highly appreciated asset. To review, today’s federal long-term capital gains rates are as follows:
How a DST Can Help You Build and Maintain Family Wealth
One of the biggest advantages a Deferred Sales Trust offers you when you sell a substantially appreciated asset is not only deferral of your capital gains taxes, but also the opportunity to build and maintain your wealth and that of your family. This is especially true when you use a DST as an alternative to a 1031 exchange.
Why Your DST Qualifies for Capital Gains Tax Deferral
Per Section 453 of the Internal Revenue Code, you can defer capital gains taxes on the sale of your substantially appreciated investment real estate or business by means of an installment sale. A Deferred Sales Trust is an innovative type of installment sales contract that not only defers your capital gains taxes, but also provides you with numerous other benefits as well.