As a high net worth individual, you likely are all too familiar with capital gains taxes. These taxes that you pay when you sell a highly appreciated asset such as a business, commercial property, investment, collectible or even your personal residence, can wipe out much of the profit you make. But what if there were a safe and legal way for you to defer your tax liability?
Reef Point
DST: An Advantageous Tax Deferral Strategy For Your Clients
As a CPA helping high-asset clients create and maintain their wealth, you hold an exceptionally prestigious, albeit challenging, position. You’re the expert to whom they look to help them maximize their profits, minimize their tax liability and shield them, to the greatest extent possible, from IRS audits. But how do you do this, especially in light of the major tax changes likely coming in the near future? The Deferred Sales Trust (DST) may be just the answer you and your clients are looking for.
Pros and Cons of the Deferred Sales Trust
If you own a highly appreciated asset that you wish to sell, one of your main concerns likely is the capital gains tax liability you will face. While several tax deferral strategies exist, the Deferred Sales Trust (DST) provides you with benefits that the others don’t. Still, it’s not for everyone.
Case Studies: How the DST Benefits You If You Live in a State With No Income Tax
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.
Utilizing the DST For Your Exit Strategy
If you’re one of the nation’s 73 million baby boomers at or very near retirement age, you may well have highly appreciated assets, such as real estate or a business, that you want to sell to help fund your retirement. The problem, however, is the potentially enormous capital gains taxes you face if you dispose of these assets via a conventional sale. Unfortunately, these taxes could eat up over half of your sale proceeds.