In a previous post, we explained how the Deferred Sales Trust (DST) can benefit you if you live in a state, such as California, that imposes a state income tax. But what if you are fortunate enough to live in a state with no state income tax? How does the DST benefit you then? Read on to discover two ways in which the DST can shield you from substantial capital gains taxes when you sell a highly appreciated asset. For purposes of these case studies, assume you live in Florida, one of the states that imposes no state income tax, and therefore no state capital gains tax.
f you’ve been keeping up with the news coming out of Washington, D.C., the past several months, you know that President Biden’s $1.8 trillion American Families Plan calls for raising the federal long-term capital gains rate from its current 20% to 39.6% if you earn more than $1 million per year. Ouch! As the owner of highly appreciated investment real estate, no one need tell you the enormous negative impact such a capital gains tax hike would have on you when you decide to sell one of these properties.
With the possibility of capital gains tax rates increasing in the near future, you face a risk that, when you sell a highly appreciated asset, an even larger portion of your sale proceeds will be eaten up in long term capital gains taxes. The Deferred Sales Trust (DST) to the rescue! If you’re a savvy investor, you may have used this unique, proprietary tax deferral strategy in the past when you sold a piece of highly appreciated investment real estate.
If you’re a legal or financial professional who caters to a high-asset clientele, you should consider becoming a Deferred Sales Trust (DST) business partner. Why? Because the DST offers your clients numerous benefits when they sell their highly appreciated assets, including the following:
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.