What Is A Deferred Sales Trust With Jake & Gino and Brett Swarts



I’m an infant with this stuff. I know I don’t want to pay capital gains tax. Tell me what a Deferred Sales Trust is. How did you end up here? I’ve never even heard of these things.


Great question. First of all, a Deferred Sales Trust is not a 1031 Exchange is the biggest thing to understand. But it is a tax deferral strategy that allows you to sell any asset of any kind and defer capital gains tax like a 1031 Exchange. Very similar, like a 401k, like an IRA. But at the foundation of it, it’s based upon a tax code known as IRC 453. You, Jake Gino, and your listeners might know it as a seller carry-back where a seller can carry paper for a buyer. When they do that, they are in a deferral state for whatever amount they haven’t received in what’s called actual or constructive receipt. The short story is it’s a solitary bag. Now how you apply that and how you use it is where the secret sauce comes in.


Brett, let’s go back to your background. How did you get this thing?


Let me start there. The origin story. I grew up in the bay area with my dad and fell in love with real estate at a young age, building custom homes room additions, I call this the MC Hammer days, my brother and I would be driving the bobcat, we would be hammering nails, putting up drywall and seeing him buy rentals buy land. This is the early 80’s. It was the Silicon Valley, a lot, a lot of things that were going on there. Fell in love with real estate, but also learned the value of hard work, learn the value of being an entrepreneur, and want it to be in real estate of some kind as I got older, I played some sports in college, played basketball in college. Then I had an opportunity to get take an internship at a company called Marcus & Millichap and that’s where my kind of intellectual financial underwriting education began. I got to learn from some of the best in the business on how to buy real estate, how to reposition real estate, how to broker real estate, how to underwrite deals, and in particular, it was multifamily. But it wasn’t always easy.

I came from a background of a very successful father, and also a very dedicated mom. But the challenge was, they were divorced when I was young. I went from seeing a lot of wealth to being kind of on the other side of wealth, because 90% of the time I was with my mom, and about 10% of the time was with my dad, and with the bad divorce, at that time, let’s just say, the child support wasn’t paid the way it should have been paid. But it taught me the value of hard work and perseverance. I met Marcus & Millichap I know I want to succeed. I don’t want any financial challenges coming between my family I want to have a lot of margins. I knew that was a big thing for my life and something I valued. I started to get some momentum and this is 2006 By the way, and things are rocking and rolling. People are 1031 Exchange, and people are buying deals people are making a lot of money. But guess what something happened in 08 so I went from making a little bit of money in brokerage to just getting my business going to overnight literally like just zero. Along with a lot of other brokers in that office. I do what every good entrepreneur does, you get a side job or a side hustle to keep the lights on.

When my wife and I were very very low income living with my brother and his condo working I was working side and nights and weekends just to support her and the baby our first baby daughter at home. I got the job at Cheesecake Factory and the guy looks at me like “what are you doing?” Like I mean, “why are you here?” And I said “I’ll tell you why I’m here I love real estate and it pays zero unless I close a deal”, “what if you close a deal tomorrow are you still gonna walk out and you know 50 grand after I do all this training for you?” He goes “I will not” and he says “why?” “I got a baby at home and I love the real estate game and I’m not leaving that.” He said, “okay, we’ll tell you what if you give me a two-year commitment you can stay here I’ll and you can work nights and weekends.” I said “great.” So by day, I would make cold calls negotiate with banks, I was going through this financial struggle, so was my clients. My clients had overpaid and take on too much debt. They didn’t have enough liquidity or diversification. They were feeling trapped with the banks in a lot of ways. By day, I try to negotiate with them try to reproduce in the properties and by night I’d sell cheesecake.

Fast forward. I did that for two years. But during that time period, my manager brought in a gentleman to talk about the Deferred Sales Trust. This is where everything changed for me. That all of a sudden there was a new way to do something that we thought we had figured out. We thought that 1031 was the end all be all. We thought we were the experts in all of these things are commercial real estate and tax deferral. But all of a sudden he said he looked for all that pain, all that struggle. They could have avoided that if they would have known about this and so like most people, we thought it was too good to be true. But I was very hungry and very open to just something that would work. So what did I do? I started to apply the Deferred Sales Trust started to talk about it. I started to get in front of clients and talk about what happened what how we can we could avoid potentially happening what happened before. So my business started to grow.




Closed Deal Story


Selling Bitcoin, Ethereum Capital Gains Tax-Deferred Using the Deferred Sales Trust


I believe that is where we’re at with cryptocurrency’s current marketplace. We closed the first Bitcoin and Ethereum case for $5 million and helped the client defer around $1.5M in capital gains tax. Now we’re getting a wave of individuals who are finding us. You might be finding us right now.

One of the biggest challenges with folks who are selling cryptocurrency is they want to be able to diversify, they want to be able to time the real estate market and or even the crypto market, they want to be able to have some liquidity, some cash flow, and so part of this vision is taking helping our clients who are in cryptocurrency, buy an investment, real estate, all tax-deferred, using the Deferred Sales Trust, also invest with Jake Mellor as the financial advisor to in a diversified investment grade security or start a business. Whatever the outcome that you want to do. Why is it that you’re investing with any type of asset? What if you could sell high, diversify, and buy back in whenever you’d like to? This is what we’ve already done and we’re doing, we’ve already proven it.

Read The Full Case Study Here



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