Consider a Deferred Tax Strategy
If you are selling, or are considering the sale of a highly appreciated asset such as a business, real estate, art, car collection, stocks, etc. with $500,000 or more of capital gains exposure, consider a deferred tax strategy to help mitigate taxes.
You may have heard of a 1031 exchange, or remember that prior to 2017, you could use 1031 exchanges for personal property. Now, 1031 exchanges can only be used for business or investment real estate.
A deferred tax strategy is a legal option to the 1031 exchange that may help you (depending on your situation and goals) as a strategy to lower current taxes and spread out capital gains over time to manage tax brackets.
Using a 100-year-old tax code under IRS code 453, a deferred tax strategy uses a form of an installment sale paired with a specialized trust that acts as a third party to hold the sale proceeds, so at the time of the sale you don’t receive constructive, taxable receipt of the asset (which would be taxable by the IRS) until later.
This is not a monetized installment sale. Sales proceeds held inside the trust are usually reinvested in other assets, like stocks or bonds. The seller receives a promissory note from the trust requiring that the trust pays the seller back over a period of time; typically, 10 years or as specified in the note. Taxes are due on the repayment amounts in the years they are received by the promissory note holder/original seller. After the note is paid off, the remaining trust assets pass to the trust’s beneficiaries per the trust’s clauses.
The simple elegance of the tax deferral strategy applies a lawful and accepted process to allow the seller of a business to defer capital gain taxes due at the time of sale over a period of time agreed upon with the seller or taxpayer in advance. Ultimately, this deferred tax strategy has the potential to generate substantially more wealth than a direct or taxed sale.
Learn more and book an appointment online to discuss your tax deferred strategy HERE.
If you have more than $1 million in investable assets, we can help you consider a deferred tax strategy as part of a complete plan designed to help you achieve your generational wealth goals. Reach out to Shawn O’Keefe at Summit Wealth Strategies™ today.
As an authorized and approved wealth advisor, Summit Wealth Strategies™ promotes a deferred tax strategy, which uses the Deferred Sales Trust (DST). The Estate Planning Team is not responsible for recommendations made by Summit Wealth Strategies™, including the Deferred Sales Trust or other tax, legal, or estate planning strategies. The tax strategies referenced are offered through a deferred tax strategy. Summit Wealth Strategies™ is an investment advisory practice that offers investment advisory products and services through Summit Wealth Asset Management (SWAM), a registered investment advisor. These tax strategies offered by a deferred tax strategy are not subject to investment advisor requirements. Insurance and annuities are offered through Summit Wealth Strategies™, LLC, Colorado Insurance License #546856.
