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Deferred Sales Trust

A deferred sales trust (DST) is a financial strategy used in real estate investing that allows the seller to defer capital gains taxes by transferring the property to a trust. The DST is designed to provide the seller with greater flexibility in managing the proceeds from the sale of their property, including investing in a diversified portfolio of assets.

Unlike a traditional 1031 exchange, which requires the seller to identify and purchase a replacement property within a strict timeline, a DST allows the seller to transfer the proceeds to a trust and invest in a wider range of assets, such as stocks, bonds, and mutual funds. This flexibility allows the seller to potentially generate a higher return on investment and better manage their cash flow needs.

One of the key benefits of a DST is the ability to defer capital gains taxes for a longer period of time compared to a 1031 exchange. This is because the DST is not subject to the same strict timelines as a 1031 exchange and can be structured to defer taxes for up to 30 years.

However, a DST can be more complex and expensive to set up than a 1031 exchange, and it may not be suitable for all sellers. It is important to consult with a qualified financial advisor or tax professional to determine if a DST is the right strategy for your specific situation.