A Deferred Sales Trust offers a unique way to unlock capital from accredited investors who are selling highly appreciated assets of any kind. Armed with this information and insight you can position your business as a solution for your current investors and attract future investors like never before.
A Deferred Sales Trust marketing campaign unlocks many different ways to raise capital.
Examples of this include:
The Deferred Sales Trust has a long track record of success and has withstood scrutiny from both the IRS and FINRA since 1996. Since it is a tax strategy based on IRC §453, it allows the deferment of capital gains realization on assets sold using the installment method prescribed in IRC §453.
In simple words, if you sell an asset for $10 million using an installment sale contract, and finance the sale, you as the seller may not have received full constructive receipt of the cash. You have become the lender. You do not pay tax on what you have not received if you follow IRC §453 since it allows you to pay tax as you receive payments. The buyer you lent money to will typically pay an agreed-upon amount of down payment to you upfront (you would pay tax on this) and then pay the rest of the purchase price to you plus interest in installments over a specific term of time. The deferral takes place as you wait to receive payment, which is typically 3-5 years.
According to the Oklahoma Bar Association, IRC §453 was designed to “eliminate the hardship of immediately paying the tax due on a transaction since the sale did not produce immediate cash. Furthermore, if the purchaser defaulted on the installment note, the seller may have paid tax on money he never actually received.”
The reason why a Deferred Sales Trust marketing campaign allows you to scale your syndication business is that it rapidly increases the money-raising process. Without a Deferred Sales Trust, you need to manually raise capital from family, friends, and others in your circle of influence, one person at a time after they sell their highly appreciated asset and after they have paid the capital gains tax which can be 30-50% of their gain. When the pain of paying the tax outweighs selling and investing with you, many elect not to sell and therefore not invest those funds with you. To raise the capital you need to solve the problem your investor is facing.
Steps to Dave using the Deferred Sales Trust:
Have you done a survey of your existing investors to ask them where their capital is? Here are two questions to ask your existing investors right now:
1) Do you have highly appreciated assets of any kind you would like to sell, defer the tax, and invest the funds into real estate all tax-deferred?
2) What would converting your highly appreciated asset, which may not be producing cash flow of any kind, to cash flow from passive real estate mean to you?
I believe you are more likely to stay top of mind and unlock capital when you can help your investors by providing valuable solutions to their capital gains tax.
Steps to Shea Using The Deferred Sales Trust:
About the Author:
Brett Swarts is considered one of the most well-rounded Capital Gains Tax Deferral experts and informative speakers in the nation. His audiences are challenged to create and develop a tax-deferred transformational exit wealth plan using The Deferred Sales Trust™ (“DST”) so they can create and preserve more wealth. Brett is the Founder of Capital Gains Tax Solutions and host of the Capital Gains Tax Solutions podcast. Each year, he equips hundreds of high net worth business professionals with the DST tool to help their high net worth clients solve capital gains tax deferral limitations.
Disclaimer: The views and opinions expressed in this blog post are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.