Here at Reef Point, we get all kinds of questions about the Deferred Sales Trust (DST). Most people, naturally, want to know specifically how this unique, proprietary tax strategy can prevent them from having to pay thousands to hundreds of thousands of dollars in capital gains taxes when they sell a high-dollar, highly appreciated asset.
Others, however, want to know the DST’s background: why it’s legal, when it became available, who offers it, and all such related questions. We therefore thought that our site visitors might like to read a brief history of the DST.
IRC Authorizes Installment Sales
Installment sales have been around for 90 years or so. The specific IRS code Section 453 was defines the rules governing sales using the installment method. This section not only specifically authorizes installment sales, but grants them favorable capital gains tax treatment, i.e., deferral of capital gains taxes when using this method of sale. Section 453 nevertheless imposes restrictions on the types of assets eligible for installment sales.
Our Tax Attorneys Create the DST
Our tax attorneys became intrigued with Section 453 and set about finding a way to make its tax deferral benefits available for all types of asset sales.
There are no “trap doors” in the DST’s structure and no offshore or other questionable activities that could cause the IRS to declare it a sham transaction. They intended the DST to comply with all IRS regulations and be able to withstand any audit the IRS might choose to conduct. In fact, our tax attorneys are so sure of this creation, that they provide audit defense at no extra cost.
After more than 4,000 transactions to date, the DST has successfully withstood 16 IRS field audits, 3 formal IRS reviews, and independent reviews by top-tier tax law and CPA firms, as well as the Securities and Exchange Commission and the Financial Industry Regulatory Authority.
Robert Binkele Markets the DST
Shortly after our tax attorneys created the DST, Robert Binkele, a registered investment advisor with nearly 30 years of experience, went into partnership with them for the purpose of marketing the DST nationwide.
Binkele founded the Estate Planning Team, the only entity authorized to provide this proprietary form of installment sale. The EPT also manages all compliance aspects of the DST, as well as the training for its members.
Greg Reese Becomes a Certified DST Trustee
Greg Reese, founder, principal, and managing member of Reef Point, likewise became interested in the DST and underwent the training and vetting necessary to become one of only 13 Independent Certified DST Trustees in the country.
As such, he manages all aspects of each client’s DST, including making investments in accordance with the client’s goals, objectives, and risk tolerance and paying him or her per the terms of the installment note he or she receives in exchange for selling the highly appreciated asset to the DST.
Bottom Line
All told, the DST is a win-win for taxpayers and the federal and state governments alike. It serves as your solution for the future whenever you face a tax liability of $100,000 or more by selling one of your high-dollar, highly-appreciated assets.
As you might expect, this short history of the DST and the people who made it possible covers only its broad advantages and benefits. To learn how it can serve your specific needs, contact Reef Point today.