This post is general information only and not intended as tax advice. Please contact your Tax advisor before making any decision based on this post. For additional information about this product, you may contact royce.running@crystalcovewm.com
Royce R. Running
9841 Irvine Center Drive suite B230
Irvine, CA 92618
949-752-7858 ph
949-596-4286 direct
Capital Gains Tax:
If you have been thinking of selling your highly appreciated Real Estate or a business to cash out or reinvest, one of your main concerns is Capital Gains Tax. That’s right, Uncle Sam wants a big piece of that cookie you spent a good part of your life baking.
In the end it doesn’t really matter how much you made, it’s how much you kept.
If you are anything like myself I know you will agree, we all work too hard to just through our hard earned investment dollars into Uncle Sam’s spending bucket when its finally time to enjoy it or invest in other products. When you get to this bridge and you are a little skeptical about crossing it, their is an option that you can use to avoid defer the capital gain tax over a period of time, even beyond your life time and on to your heirs. Sound good? read on.
Deferred Sales Trust™:
My Good friend Royce Running at Cristal Cove Wealth Management in Irvine invited me out to lunch the other day to explain some of their products. What got my attention was their Deferred Sales Trust (DST™). The DST™ is now a new tool I have added to my tool belt to offer our clients that want to sell their highly appreciated Real Estate.
The Way Out:
DTS™ is a perfectly legal way to defer your real estate capital gains tax and reduce your over all tax burden. For those of us that have highly appreciated assets such as homes, Commercial Real Estate, and businesses, are often reluctant to sell assets because of the capital gains tax and depreciation recapture costs associated with the sale.
DTS™ is a legal method, combining several sections in the tax code, which allow the seller of the property to defer the capital gains taxes over a period of time. The The DTS™ is a little different to the common 1031 Exchange which limits the seller to reinvest into other real estate of a greater value within a certain amount of time. DTS™ allows the seller to roll the equity into other investments such as stocks or CD’s or a business on their own watch.
What is Capital Gains Tax?
Capital gain is profit we are taxed on when we sell an asset. The capital gain is calculated by subtracting what you paid from the net sales price. The current rate for an asset owned for one year or longer is 15% for federal taxes. Most states charge 5-10% on top of that and California has one of the highest rates at 9.3% That’s A total of 25%. If depreciation was deducted on the asset the cost basis is lowered by that amount, thus increasing the Capital gain even more.
How Does Deferred Sales Trust™ Work?
I’m going to leave it to Royce explain all the nuts and bolts in detail as it is quite in depth and I’m a Realtor not a tax expert but here is a short description of how it works.
Basically to get the ball rolling the property owner (Grantor) transfers the property into a Trust set up by Royce. The Trust pays the Grantor for the property in the form of a “Installment contract”. It is strictly a private arrangement between the Trust and the Grantor.
The payments can be made immediately or over some period of months or years. The Trust then sells the property to a third party “the buyer” with the help of Brett Dalbeth (Your Realtor).
There are Zero taxes to the Trust on the sale since the Trust purchased’ the property for the same price it sold it for to a third party. The Grantor is not taxed because they have not yet received cash from the sale.
The Proceeds from the sale will be safely earning interest from other investments of your choice including Stocks, Securities, CD’s, Real Estate, or even a new or existing business. The Grantor may also choose to receive a steady income deferring over a period of time which is transferable to the beneficiary or heirs.
The goal is to keep your once Uncle Sam’s portion in the Trust for as long as possible working for who deserves it most. You!
Now if that wasn’t exciting enough how about if I tell you, part of the payments received is tax free return on basis, and the other part is return on gain which is taxed at the capital gains rate mentioned above.
There are so many other benefits to the DTS™ but I will leave it up to Royce to go into detail. I just know most people like to make smart decisions when it comes to their net worth and what will be left to their heirs.
For more details please give me a call I would be happy to refer you to a specialist who can fill you in on this great tool and how you can take full advantage of your own hard earned money.
Please note this post is for informational purposes only. As Realtors® we are not able to give tax advice. I am Realtor® not a tax expert and you should consult with a tax professional about your unique situation before making any financial decisions.
Brett Dalbeth
888-399-4844
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