Overview
A Deferred Sales Trust uses IRC Section 453 installment sale rules to defer capital gains taxes on the sale of highly appreciated assets. Instead of selling directly and paying immediate capital gains tax, you sell to a specially structured trust, which then sells to the buyer and pays you in installments over time.
Best For
- Cryptocurrency holders with large unrealized gains
- Real estate investors selling appreciated property
- Business owners selling a company
- Anyone wanting a 1031 exchange alternative
Key Features
- ✓ Defer capital gains tax across many years
- ✓ Works for any appreciated asset (crypto, RE, business, stocks)
- ✓ Trust reinvests full sale proceeds immediately
- ✓ Installment payments spread tax burden
- ✓ More flexible than 1031 exchanges
- ✓ Can diversify out of concentrated positions
📊 Tax Benefits
- ✓ Defer capital gains to future tax years
- ✓ Spread gains across lower tax brackets
- ✓ Full sale proceeds reinvested immediately
- ✓ No requirement to buy like-kind property (unlike 1031)
- ✓ Potential to reduce total lifetime tax burden
- ✓ Works for federal and state capital gains
Considerations
- Must be structured before the sale closes
- IRS scrutiny requires careful compliance
- Trust must be a legitimate installment sale
- Cannot have direct control over trust investments
- Professional tax advisor essential
- Ongoing installment payment obligations