Deferred Sales Trust - Anyone w/ personal experience?

[meridiver]

While doing some research into selling some highly appreciated property, I ran across a proprietary investment strategy called a Deferred Sales Trust. As I understand it, it's basically an installment sale except that you sell the property to an independent trust who then sells the property to your buyer and distributes the proceeds to you over x number of years. You only recognize capital gains to the extent that funds are disbursed to you each year, thus enabling you to stay in the 0% and 15% capital gains tax brackets each year instead of the higher surcharge bracket that you'd be in if you had to recognize the entire gain in the year of sale.

Has anyone had personal experience with this type of arrangement? It sounds like a great deal, which makes me a bit skeptical.

 

[braumeister]

This is a pretty good take on it. Kind of a long read, but he goes into all the ins and outs of it:

Deferred Sales Trust - A Tax Plan Or A Product ? A Bit Of Both

 

[Sunset]

While doing some research into selling some highly appreciated property, I ran across a proprietary investment strategy called a Deferred Sales Trust. As I understand it, it's basically an installment sale except that you sell the property to an independent trust who then sells the property to your buyer and distributes the proceeds to you over x number of years. You only recognize capital gains to the extent that funds are disbursed to you each year, thus enabling you to stay in the 0% and 15% capital gains tax brackets each year instead of the higher surcharge bracket that you'd be in if you had to recognize the entire gain in the year of sale.

Has anyone had personal experience with this type of arrangement? It sounds like a great deal, which makes me a bit skeptical.

Sort of like being a little pregnant ?

I see this as an illegal scam, where you will pay all the taxes and probably have your property stolen (legally) from you.

As soon as you sell the investment, BANG, you owe the IRS taxes on it. Does not matter what the buyer (the trust) does with it then.

Sell a property for $0 to the Trust, BANG, IRS will see the play and imput a value it should have sold for and tax you on that value.

 

[Onward]

Interesting. Never heard of it. There are real tax advantages to legitimate installment sales. But this smells like something that the IRS would disallow.