Taxflow vs Cash Flow:

How the Deferred Sales Trust is Like an IRA and Why You Should Care

John D. Rockefeller once stated, “Own nothing, but control everything.” Part of what I think he meant was ‘what you don’t own can’t be taken from you’ and it is a fundamental rule of asset protection.  I wonder if he were here today if he would also say, “earn everything, but control the timing of receiving it.” You see in the New Biden Economy taxes are higher. Robert Kiyosaki taught us all about cash flow and I’m curious if Mr. Rockefeller, if alive today, would say cash flow is no longer the clear number one way to preserve wealth. Perhaps, he would say we must now build wealth for ourselves and our family via Tax Flow. I think Taxflow is considering the tax consequences or advantages of investing in a certain asset type, structure, and/or timing of receiving earnings. For our time together over the next few paragraphs let’s focus on the timing of receiving earnings.

June 14th, 2021 by Brett Swarts founder of Capital Gains Tax Solutions, LLC

How the Deferred Sales Trust is Like an IRA and Why You Should Care


“Deferred Sales Trust is a trusted, proven solution to defer capital gains tax.” – Brett Swarts, Founder of Capital Gains Tax Solutions


Is the Deferred Sales Trust is Like an IRA?

The answer is, “yes.” How?


1. Tax-Deferred Investment Account

A traditional tax-deferred account is a designated savings account or investment option that doesn’t require that you claim the investment income earned inside the account on your tax return. The funds do need to remain in the account to qualify. You defer paying taxes until you withdraw from tax-deferred savings or cash in the investment.

The Deferred Sales Trust is like an IRA since an IRA is a Tax-Deferred Investment account where you do not have to take the net proceeds in the year your highly appreciated sale is made and the earnings that accumulate in the DST can be delayed a few years. Therefore, the funds in the DST will be fully tax-deferred until they’re paid back to you. This can result in a significant improvement in the investment performance of the DST portfolio.

We do recommend you receive some payment over the first few years of the DST, however, there are no minimum required distributions. This is tax flow at its finest. Receive funds when it makes sense for you. It’s kind of like selling when you have bonus depreciation from a new CRE property you just purchased with a brand new depreciation schedule. If the timing is right and you have enough bonus depreciation, you may be able to offset your capital gain.


2. Lower Adjusted Gross Income (AGI)

A tax-deductible IRA contribution lowers your adjusted gross income (AGI) as well as your tax rate. Not receiving income from a DST where you previously were receiving income from let’s say an apartment complex or a sale of a business works the same way to potentially lower your adjusted gross income. 

For example; a recent Deferred Sales Trust client sold his business for $2.6M in Alabama and deferred around $600,000 in capital gains tax. He is in his 40’s and his household earnings are in one of the highest tax brackets. Rather than receive the $2.6M immediately and investing the funds into cash flowing producing assets which he may not be able to shelter the income, he chose to become the lender to the Deferred Sales Trust and receive no payments for a few years in exchange for installment payments from the DST over time. The earnings are somewhere around $200,000 per year in the DST. This $200,000 is compounding and growing in the DST and not being received by him until a later date. A date in which he may retire and have a lower active income and cash flow which can be perfect timing for the tax flow strategy (receive income when it’s ideal for you tax-wise). 


Who does The Deferred Sales Trust work for?

Virtually any individual or entity can utilize a DST to defer capital gains taxes on the disposition of a qualifying asset including primary residence owners, investment real estate, businesses, stock including public or private, cryptocurrency, artwork, and collectibles. Gather the sale of multiple assets into one DST trust for making your estate plan simple and clear. Here is a video with Kevin Harrington from Shark Tank discussing the selling of stock and using the Deferred Sales Trust. See these and read about more Advantages of The Deferred Sales Trust™ (“DST”) in a recent article here.  


Does the IRS Allow The Deferred Sales Trust? 

So far, the answer is yes. 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, which 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 100% of the sale, you as the seller have not received constructive receipt of the cash. You have become the lender. You don’t 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. Typically 3-5 years.

Can it do the same for you? What are the steps? 

Sorting out capital gains tax deferral strategies can be confusing. Also, finding a proven track record tax deferral strategy that gives you tax flow flexibility of timing to receive earnings, debt freedom, liquidity, diversification, cash flow and the 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™ (“DST”). So you or your clients never have to feel trapped by capital gains tax or a 1031 exchange ever again and now feel more in control of your cash and tax flow. Get clarity today on the differences between each tax deferral strategy you are considering including the Delaware Statutory Trust, Charitable Remainder Trust, 1031 exchange, Opportunity Zones and learn more about The Deferred Sales Trust™ (“DST”) today by downloading a free e-book, Sell Your Business Or Real Estate Smarter here at

Here’s to making the best decision for you, your family, and your estate, no matter what the final decision will be for the Biden Administration on the new tax proposal policies. 


About Brett Swarts:

Brett Swarts is considered one of the most well-rounded Capital Gains Tax Deferral Experts and informative speakers in the U.S. 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. 


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