Capital Gains Tax Deferral Strategies. The top legal questions to ask of every tax deferral strategy including the Deferred Sales Trust, Delaware Statutory Trust, Charitable Remainder Trust, Monetized Installment Sale, 1031 exchange and Opportunity Zone Deals. 
You’ve worked for years to build a business, private practice, real estate portfolio or bought and lived in a primary home which has appreciated tremendously.
You want or need to sell, however, you are facing a capital gains tax somewhere between 30-50% of your gain.
You need a plan, so you search for strategies or legal tax loopholes to defer the tax. You start to find a few on the internet which look appealing but you are unsure what is legal and the correct fit for your personal and financial needs.
You call your CPA and they may know about these few, however, they may have never heard of the ones you found or have never had an actual client use the strategy you bring to their attention so they don’t have a strong opinion either way.
You’re nervous because you don’t know either, and yet, you are still feeling an overwhelming pressure to make a correct decision.
Are you in good hands? Is the tax deferral strategy you are considering safe?
You need answers, but you are not sure where to start. Here are the best questions to ask to make sure you are spending your time researching a sound strategy with a legitimate track record.


What are the top questions to ask of every tax deferral strategy?

1)What is the IRC (internal revenue code) section the strategy is based on? How many have you closed with clients and over how long of a time? 
Simply put, you want to know the foundation is strong before you build your tax deferral house. It is best to build on a rock-solid tax code, and not on anything else. It is also best to build with a builder who has been doing this for more than a decade and has more than a handful of closed transaction history.
2) How many closed transactions have occurred using your strategy and how many IRS audits has your structure survived with your actual clients? Were the outcomes successful for your clients? 
The most important question. Let’s use a health care analogy here where the Brain Surgeon is a Tax Attorney. Make sure the Brain Surgeon has actually had patients (their clients) who not only survived the surgery (tax deferral was the result), but also are not in jail (survived the IRS Audits).
BONUS: A follow up question here would be; has the strategy ever been on an IRS watch list or an IRS promoter list? These lists are not good lists to be on and are a reg flag for the strategy if they are. 
3) Are there pending legal cases with you, any of your clients or the structure with U.S. Government or State Authorities? If so, what is the current status of such cases? 
Immediately to save you time and energy, ask about the track record of the proponents of the structure. Continuing with a health care analogy….You wouldn’t have surgery on your brain with a brain surgeon who’s never actually performed surgery nor do you want to jump into a long term tax deferral structure with a group who has not been under audit with the IRS or who is currently fighting the IRS for the first time. There is too much risk in pending cases with unproven track records. Your deal is too important to take a chance.
BONUS: Follow up with these questions:
How might the outcome of this my tax liability? Penalties? 
•  Did you defend your client(s)? Hire outside legal help? Why?
•  What was the outcome of these audits? Who paid for the legal costs? 
4) Will the legal team indemnify your case? 
In other words, do the attorneys who are structuring this deal for you stand behind their work and are they putting their resources on the line?
5) Is there a lifetime audit defense built into the deal? If so, who pays? 
  • Or any audit defense? Again, make sure you have a plan, a budget and protection in case the IRS comes knocking at your door.
6) Will the legal team put all of the above in writing and send you the cases where they have defended clients vs the IRS?
  • Please don’t overlook this step. This is important to know the attorneys who structure the strategy stand behind their work while on the phone with you and in writing.

Why is this important and who are most vulnerable to capital gains tax? 

According to the American Banker Association, there is an estimated $17 Trillion which will pass from one generation(Baby Boomers) to the next generation (their children) in the next 18 years. Over 10,000 baby boomers are turning 65 every day in America and there are 77 Million baby boomers in the U.S. alone.
  1.  $17 Trillion as of a few years ago. This number is likely $20 Trillion today
  2. 10,000 Baby Boomers Turn 65 every day in the U.S.
  3. This is the largest wealth transfer in the history of the planet…..that we know of.
Many of these baby boomers own a primary home, business, and investment real estate. This same study found the above asset types represent 50% of all of America’s net worth. That’s over $8.5 Trillion. These assets can take up a huge amount of time and energy to manage the toilets, trash, employees, and liability. Many will likely consider selling in the near future and they are faced with what likely is the largest expense (capital gains tax) on the largest transaction ( sale of their highly appreciated asset) in their lifetime. The ramifications of this single transaction can and will have an effect for generations to come. Let’s say out of the $8.5 Trillion none of the above Baby Boomers use a tax deferral strategy and let us use a conservative 30% tax. That’s’ $2.5 Trillion tax! Let that sink in for a moment. That tax could have been kept in their own families and given to a charity of their choice. Using a proven tax deferral plan can be the difference to hundreds of thousands if not millions of dollars for your estate. The funds of which can fund your family’s needs for generations or help those most in need (charitable causes).
Using a proven tax deferral plan can be the difference to hundreds of thousands, if not millions, of dollars for your estate. The funds of which can fund your families’ needs for generations to come or help those most in need (charitable causes). 
No matter what your age is….owning properties and businesses can be stressful; especially if you’re ready for a new start, new property, a new venture or to start a new legacy with your wealth. The challenge is many baby boomers are wanting to retire from having to own and manage properties. Having a tax-deferred plan, gaining clarity in the differences between multiple tax strategies, and confidence in which one is best for you, is vital to creating and preserving more wealth.
Sorting out each tax deferral strategy can be confusing. Also finding a proven track record tax deferral strategy that gives you debt freedom, liquidity, diversification, ability to move funds outside of your taxable estate all while not using a 1031 exchange at the same time is hard to find. That’s why we’ve started Capital Gains Tax Solutions and offer the deferred sales trust so you never have to feel trapped by capital gains tax or a 1031 exchange ever again. Get clarity today on the differences between each tax deferral strategy you are considering and learn more about the deferred sales trust today by booking a no-cost call here at so you can make the best decision for you, your family and your estate.
Here’s to more time and energy to enjoy the wealth you have earned and to create and preserve more wealth for generations to come!
Brett Swarts
Founder, Capital Gains Tax Solutions 
Host of Capital Gains Tax Solutions Podcast 

Get a FREE Strategic Callwith Brett Swarts 


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