How Deferred Sales Trust works?

Link: https://rankingmastery.com/edit_questions.asp?action=info&id=995&a=9048&p=834

 

Answer is:

This set of rules is sale where...let's say, we did a traditional installment sale set and it came to you as a $10 million bill that you were selling. Then you would have it free and clear, you had a zero basis. Let's say you had a 40% tax. If you didn't know tax strategy... so you have 4 million, if you would sell. Instead, you might consider a 1031, but you also might consider a traditional seller carryback.

So I come to you and say that I want to buy your property for 10 million, but I'm going to give you a $2 million down payment.

If you received $2 million, that's called an actual receipt. You would owe tax on that 2 million, but that other 8 million is in a deferral state because you did a carry back. Your CPA knows it.

 

We actually insert right before a new buyer comes in. Let's say a new buyer had $10 million. They don't want to do a seller carryback. They just want a new buyer to cash them out. Well, that's what we do.

We line up this new buyer as a broker or your broker does, and they're ready to buy it for 10 million. Tthe trust jumps right in between close of escrow. It is like a simultaneous close. They turned to sellers and say "I want to buy your property for 10 million, but I'm going to give you a zero down payment in exchange for a note."

If the trust gave you a zero down payment in exchange for a $10 million note, how much actual receipt could you receive?

There's nothing at that point. We're in a seller carryback trust. Immediately, they turn around to that buyer who already had the 10 million lined up. It's ready to go, they're going to sell it to that buyer for 10 million.

Now, if the trust is bought for 10 million and sold for 10 million. How much taxable gain is the trust at? Well, it's a wash. The wash you got, they bought and sold for the same price. There's no gain there, the smoke clears, the buyer takes title and the funds are sitting in the trust.

 

Watch on Video: https://www.youtube.com/watch?v=EGZPknqTX4g

 

Listen on RankingMastery podcast

Episode Name: How Deferred Sales Trust works??

iTunes: https://podcasts.apple.com/us/podcast/how-deferred-sales-trust-works/id1500645610?i=1000493964178 Spotify: https://open.spotify.com/episode/5hnzSKEgAxNp0TMwaExWS0

 

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