What is Deferred Sales Trust™

The Deferred Sales Trust™ (“DST”) is a specialized type of installment sale under IRC Section 453, which has had a long track record of success and has withstood scrutiny from both the IRS and FINRA. 

The Deferred Sales Trust™ originates as an installment transaction under IRC Section 453, with the seller operating as both a creditor and a noteholder. The tax deferral effect under that code section is created by the conversion of the taxpayer’s equity interest to a creditor (loan) interest upon the sale of the asset. The loan is issued to an unrelated third-party trust (with the taxpayer’s collateral security protected), which then sells the original asset to a third-party buyer and replaces it with other assets that are acceptable to the taxpayer as collateral for the note and are more diversified and liquid. The trust’s assets are mostly securities, such as stocks, bonds, annuities, mutual funds, managed money accounts, and so on, but they can also contain traditional real estate and businesses.