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.
Capital Gains
2 Unique DST Applications You May Not Have Known About — Until Now
When you think about a Deferred Sales Trust, you likely think of it as a unique strategy for selling highly appreciated investment property while deferring capital gains taxes. But you may not realize that you can also use a DST as a business exit strategy and when selling your primary residence.
Alternatives to Paying Capital Gains Taxes on Sale of Real Estate or a Business
If you own appreciated investment real estate or a business that you want to sell, you may be hesitant to do so because of the capital gains tax exposure you face. The rate could be as high as 20% if your taxable income exceeds $501.600 and you’re a married taxpayer filing jointly.
How are Capital Gains Taxes Calculated?
Capital gains taxes stand to take a big chunk out of your profits when you sell an asset. However, like most taxes, there are many things that go into the exact calculations of the capital gains tax you will pay. Remember that capital gains tax applies to a variety of different assets, including stocks, property and businesses. A unique factor of capital gains tax is that the amount of tax depends heavily on how long you had the asset. Depending on the state you live in, the state government may also levy capital gains taxes in addition to the federal government.
Can a DST Ease the Financial Strain of a Divorce?
The Deferred Sales Trust is a tax strategy that uses the proceeds from the sale of virtually any asset to establish a trust held by a certified, third-party Deferred Sales Trustee. Read about two scenarios with varying degrees of post-divorce capital gain realization where the Deferred Sales Trust tax strategy would have been useful.