Roundtable Focus Group | Visits the Deferred Sales Trust Strategy

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Education & Training with Executive Director of Education at eXp Realty


Today we held a meeting in Walnut Creek, CA. to introduce a strategy known as the "Deferred Sales Trust" to a group of elite Executive Level Brokers and Realtors.  The program was sponsored by QFN out of Sacramento, CA.  The CEO / PRESIDENT Daniel Ahmad was the presenter of this optional strategy for Sellers, that can also be used all across the Country. 

We had 13 Top Producing REALTORS / BROKERS from both Contra Costa and Solano Counties in attendance.  There were several reasons we wanted to introduce this strategy, and have a group of trusted and reputable Real Estates Professionals as a focus group:

1. To provide the ability to help sellers with this new "Deferred" tax strategy
2. To open new opportunities and doors which will increase listings and referral business
3. To help agents get educated on the DST in the event a seller may have been introduced to it by their CPA or Financial Planner, or heard about it from a family member or neighbor (no surprises)






The group met for about one hour today, and the presentation was very informative.  There were many questions and open discussions regarding ALL the possibilities, both negative and positive.  What were the differences of the DST as compared to a TIC or a 1031 Exchange.  These Talking Points will provide you with a brief summary of the key ideas and facts about what a Deferred Sales Trust is, how it works, and what the benefits are to the seller. This perfectly legal way to defer capital gains tax and reduce your sellers tax burden may be better than anything you have previously heard about. 

 

                THE DEFERRED SALES TRUST STRATEGY

   

  _____________________________________________________________________________________________________

Summary:
A Deferred Sales Trust is a special type of sale authorized by the IRS that lets the property seller pay the capital gains over time, rather than immediately at the time of sale as in a typical transaction.  Rather than losing a significant sum to taxes at the time of sale, you have the opportunity to pay your capital gains taxes over many years.

Benefits:
Avoid paying current capital gains and depreciation recapture, create lifetime income, protect assets from creditors and lawsuits, and the assets pass to your beneficiaries, estate and gift tax free. There is no maximum to the size of value of the transaction. The DSTTMcan be used with any kind of entity, i.e., LLC, S or C election corporations as well as individuals who own real estate , rental properties, vacation homes, commercial properties, hotels, land, industrial complexes, retail developments, and raw land, to name a few.

Why Choose a DST:
1)
You may want to sell but don't want to pay the taxes.  2) You may want steady income and asset protection.  3) You may want to avoid estate taxes.  4) You may want to sell because your investment property appreciation is worth more than what the rental income is paying (i.e. asset in a trust would provide higher income).  5) You may feel that managing real estate is no longer attractive.  6) You may want to sell but can't find a quality 1031 to exchange into.

Legality:
Approved by the IRS, The DSTTM is a legal method, combining several sections in the tax code, which allow the seller of the property to defer capital gain taxes due at the time of sale over a period of time, even beyond your lifetime. Deferring taxes, legally, is not new - commonly used tax deferral examples are 1031 exchanges and installment sales. Various types of trusts are used by millions of Americans to protect and transfer assets to their heirs outside of probate and to minimize and even avoid selling their assets to pay estate taxes. 

Control of Money:
You choose your trustee(s) and decide how the money is to be invested.  Beneficiaries don't control or have access to your money.

Features of a DST:
A "DST", facilitated by you and the QFN team of experts, offers sellers the opportunity to:

•Avoid unlimited amount of current taxation on the sale.
•Eliminate the requirement to immediately reinvest in real estate or another business
•Receive steady and reliable income not dependent on tenants or business operations.
•Maximize net after tax and after expense income from their assets.
•Terminate all active management responsibilities of owning real estate or a business.
•Increase the basis on all new properties and businesses, avoiding "Low Basis Carryover".
•Pass on any amount of assets to their beneficiaries, free of estate taxes.
•Receive income on a tax-advantaged basis, always lower than ordinary income rates.
•Defer the income from the assets until the income is actually needed.
•Diversify assets out of real estate and businesses to minimize financial risk.
•Access their funds for emergencies and opportunities.
•Protect assets against creditors and lawsuit judgments.
•Buy smaller properties, other businesses, and even foreign properties and businesses, while avoiding all current taxation.   

When To Use: 
This tax strategy can only be used if a sale has not closed escrow.  You must transfer the property to the trust BEFORE the close of escrow.

Paying the Taxes:
From your annuity payments, a portion is tax free, another portion is taxed as ordinary income, and a final portion is taxed as capital gains.

The Next Step:
If you're in escrow now, or seriously considering selling, QFN will provide a free Illustration Request.  This no obligation report will show the results of your transaction using a Deferred Sales Trust.

Compliance:
Not all tax and financial strategies are suitable for all investors.  You should always consult with your tax and financial advisor's before making a decision.

       ______________________________________________________________________________________________________________

If your sellers ask you about a DST at your listing presentation, you might find the information in this post to be somewhat valuable.  If your sellers tell you they don't want to sell because of the equity they have in their property, and the possible tax consequences, you might want to mention the DST.  This is not an endorsement or sales post, it is merely an educational tax strategy that I wanted to share with you.  If you have the power to help your sellers in ways no other agent can, then you bring "additional value" to those who need your services and expect you to have this type of knowledge.  I hope you can benefit from this information as much as many of your sellers and investors can!

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Ambassador
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Brad Andersohn
Executive Director of Education at eXp Realty - Fairfield, CA
ActiveBrad - 707.646.1876
Hello Lady In Red!!  How are you? I see you get and understand the benefit of the DST.  How many clients out there may feel the same way if they only knew about this?  There are so many benefits to a DST, I too am considering moving one of my rentals into a DST.  Why?  No more property management, landlord stuff, plus a steady flow of income that might be more than I am making on the property as a rental. Man I love this stuff!  Great to hear from you, I have been so very busy, sorry I haven't been by your blog lately.  Will do my best to get around the rain sometime this weekend!  :-)
Aug 07, 2007 04:25 PM #15
Ambassador
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Brad Andersohn
Executive Director of Education at eXp Realty - Fairfield, CA
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Irina - if you have any questions or need more info, you can contact me or qfn directly, they know I am blogging about this, they have read my post and the comments, and are ready to help anyone that may be interested in using or learning more about this specific tax strategy. Thanks for your comment!!  :-)
Aug 07, 2007 04:27 PM #16
Rainmaker
298,347
Ray Saenz
Exit Realty Laredo - Laredo, TX
Homes for Sale in Laredo, TX - Texas, Realtor
Brad,

Good blog, and I came to say hello, sometimes we do not see us often on the rain, you are so busy or I am, take care my friend.

Ray Saenz
Aug 07, 2007 04:53 PM #17
Rainer
34,223
Marie Kletke
iNet Realty - Long Beach, CA
Broker - Long Beach Real Estate
Thanks Brad!  I've bookmarked the page for future reference.  This is great especially for California where there will be substantial capital gain. 
Aug 07, 2007 05:07 PM #18
Ambassador
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Brad Andersohn
Executive Director of Education at eXp Realty - Fairfield, CA
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Ray - great to hear from you.  Yes, I have been very busy too!  I Only blog late at night and early mornings and some days, just can't get to it at all.  Weekends are my best times to really run around and play in the rain, but as a family man who likes to travel, fish, enjoy the outdoors camping, it has left me little or no time lately.  Hope all is well with you and your family!!  Thanks!!
Aug 07, 2007 05:13 PM #19
Ambassador
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Brad Andersohn
Executive Director of Education at eXp Realty - Fairfield, CA
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Marie - this is for more than just folks who have equity, it's for investors, and in any state of the US.  You can use this with investments, commercial, residential, non-owner and owner occupied, apartment buildings, land, etc.  It's such a fantastic tool for the right clients.  Glad you found this post, I hope one day you can use this info to help out some of your clients!!  Thanks Marie!  B-)
Aug 07, 2007 05:16 PM #20
Rainmaker
709,521
Bill Roberts
Brooks and Dunphy Real Estate - Oceanside, CA
"Baby Boomer" Retirement Planner

Brad, this is a good strategy for someone who wants to go "down and out." Somebody still "building" will need to consider other strategies including the 1031 exchange and possibly the "Illinois Land Trust."

Thanks for the update - from your earlier post "teasing"  about this.

Bill Roberts

Aug 09, 2007 07:37 AM #21
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Brad Andersohn
Executive Director of Education at eXp Realty - Fairfield, CA
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Bill - thanks for your comment. I wouldn't neccessarily say this is for the down and out, in fact it may be just the opposite of what you think.  This is strictly a deferred tax sale to avoid paying all Capitol Gains tax and othe taxes at the time of sale.  This is not like a reverse mortgage, and with a 1031 exchange, you not only still have taxes, but you have proerty taxes based on the sales price of the exchange property for the rest of your life.  DSo in my opinion, this is for the investors, the HIGH equity homeowners, and the ones who want to create a steady and protected long term income that collects interest as it sits in a trust, and can be handed down to your heirs when that time comes.  Sorry, just thought I'd clarify that for anyone reading that may have been confused by the :down and out" comment.  Thanks!!
Aug 09, 2007 12:47 PM #22
Rainmaker
298,347
Ray Saenz
Exit Realty Laredo - Laredo, TX
Homes for Sale in Laredo, TX - Texas, Realtor
Brad,

the same happens to me, weekends it is a good time to blog or read, but many times we have to do activities with family or dedicate more time to them, I agree, also you seem very busy with your activities, Are you prepared for the next UFC? it will be good, I believe that it is  Auguest 25th or 26th,   www.ufc.com I want that Randy the Natural couture wins, but he is too old, the other guy it is just 2X, so a lot of difference on agen,  I go for Randy, but who knows,  maybe the young guy will win for sure,  bahh :) that's is life my friend.

I will be around if you need something, take care and nice to hear from you too.

Ray Saenz
Aug 11, 2007 05:58 AM #23
Ambassador
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Brad Andersohn
Executive Director of Education at eXp Realty - Fairfield, CA
ActiveBrad - 707.646.1876
Go Randy, Go Randy, Go Randy!!!  LOL!  :-)  Thanks Ray for the update, do you think Randy or the New guy might be interested in doing a DST (Deferred Sales Trust)?  I know they must own Real Estate, have you considered sending them a letter or email asking to be their agent?  Why Not?  They need real estate too!  Make you wonder for a moment doesn't it?!?  Take care and keep in touch!  :-)
Aug 11, 2007 11:59 AM #24
Anonymous
dean guadagni

Brad,

 We met at Inman, my name is Dean Guadagni and I am with Domus Consulting Group. I write a blog, deansguide.wordpress.com, and one of my main focal points has been the 1031 Exchange rip offs of the 1031 Tax Group aka Ed Okun. 

The losses of victims of 1031 swindles is well over $150 million this year alone! People are writing me with horror stories of retirement monies stolen and a fear of a bleak future scenario.

 I have also highlighted the lack of legislation, at the local-state-national levels, and how Qualified Intermediaries are not being "policed."

I think the information you are presenting is CRITICAL. People need to understand this safe alternative to the 1031 industry. Thank you for bring this to my attention.

Dean G. 

Aug 24, 2007 07:42 AM #25
Ambassador
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Brad Andersohn
Executive Director of Education at eXp Realty - Fairfield, CA
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Hey Dean, I remember you. You and I spoke while chatting with Brian Brady!  It was great meeting you in person!  I am glad that you are informing the masses on 1031 exchanges and the crooks that are out there. If you use First American's 1031 exchange company, this will never happen to you or your clients.  I have been with them over 20 years, and we have never had anything like this happen in our exchange company.  When I read comments like yours, it makes me sick to my stomach to think how these people have been robbed blind of their life savings.  I would always recommend an exchange company that has a long lasting reputation, and the financial strength of a corporation like First American.  I'll be by to check out your blog, it's a great thing you are doing Dean. Thanks for caring and educating all who read your blog. You're a good man!  B-)
Aug 26, 2007 03:45 PM #26
Rainmaker
298,347
Ray Saenz
Exit Realty Laredo - Laredo, TX
Homes for Sale in Laredo, TX - Texas, Realtor

Brad,

My friend, go to www.ufc.com,   you are invited to my home to watch the fight :)  I suppose that everything is goo with you ! :)

Ray Saenz

 

Sep 08, 2007 11:37 AM #27
Ambassador
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Brad Andersohn
Executive Director of Education at eXp Realty - Fairfield, CA
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Ray - I'll check out UFC if you'll check out DST and let me know what you think!!  :-)  Thanks for the invite my friend!
Sep 08, 2007 02:45 PM #28
Anonymous
Paula Straub

Brad,

I am glad you are reaching real estate agents and brokers with tax saving alternatives. The DST is certainly one method, though others are the Self Directed Installment Sale, the Charitable Installment Bargain Sale and the CRT as well as 1031s. The SDIS is much more cost effective than the DST and the benefits as great. For summaries of each, go to www.savegainstax.com . Everyone should know that combinations of a couple strategies might work best and no two cases are alike. I can field any questions on any of these for anyone interested. During crunch times such as this, the more tax savings one can implement the better! 760-917-0858

 

Oct 23, 2008 07:17 AM #29
Rainer
135,548
Bill Exeter
Exeter 1031 Exchange Services, LLC - San Diego, CA
1031 Tax-Deferred Exchange Expert

Hi Brad,

I have not seen any IRS rulings on the subject yet.  I know there are a number of Private Letter Rulings pending, but I have not seen any specific guidance issued by the IRS.  You indicate that it has been approved.  Can you provide the citations or rulings where approved? 

Thank you so much.

Oct 23, 2008 02:37 PM #30
Ambassador
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Brad Andersohn
Executive Director of Education at eXp Realty - Fairfield, CA
ActiveBrad - 707.646.1876

Bill - I have not seen any IRS ruling in this regard, you might want to search the web or contact the folks who came and put on this event.  I included a link to their site in this post. Thanks for reading and commenting.

Oct 24, 2008 04:48 AM #31
Rainer
135,548
Bill Exeter
Exeter 1031 Exchange Services, LLC - San Diego, CA
1031 Tax-Deferred Exchange Expert

Hi Brad,

I know QFN.  I'm not sure who Daniel Ahmad is.  I met with Jim Files, president and CEO a few months ago as well as Gary Katz their EVP and Betsy Hartwell their director of marketing.  Did Daniel provide any handouts?  I'll get back in touch with Jim to see if there is any new ruling and let you know. 

Oct 24, 2008 05:38 AM #32
Rainer
135,548
Bill Exeter
Exeter 1031 Exchange Services, LLC - San Diego, CA
1031 Tax-Deferred Exchange Expert

Hi Brad,

I just received an email back from Jim Files with QFN.  He indicated that they are not involved with Deferred Sales Trusts.  The link to Daniel Ahmad is a broken link.  Let us know if you have anything from them that might show the IRS has approved this. 

The few providers that I have spoken to that have indicated the IRS has approved the DST say so because the DST is structured under Section 453, but the actual code (Section 453) does not even mention DSTs, and never mentioned PATs either, so the claim is misleading.

I know that a number of providers have said that they have applied for a Private Letter Ruling from the IRS, but that they have not received it yet.  They have been saying this for about 18 months now. 

Would appreciate anything that you might see or could obtain from Mr. Ahmad.  Hope all is well.

Oct 24, 2008 05:55 AM #33
Ambassador
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Brad Andersohn
Executive Director of Education at eXp Realty - Fairfield, CA
ActiveBrad - 707.646.1876

Hey Bill - wish I could help you out more, I posted this over a year ago, and I don't work for the title industry anymore.  I am a full time community Builder and evangelist for ActiveRain now.  If I do hear of anything along these lines, I'll be sure to post it back here. Thanks. :-)

Oct 24, 2008 12:02 PM #34
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