Flipping America 565, The Deferred Sales Trust

By on November 1st, 2022 in Podcast

podcast 565 Deferred Sales Trust

Opening:

You can sell a property that has a massive capital gains tax liability that you can put off or perhaps eliminate by using a Deferred Sales Trust. You’ll need an expert to set this up and I have one for you today. 

I really like what my friend, Roger Herring says about paying taxes. We have no obligation to sign up to pay the maximum amount of taxes. Tax breaks are built into the tax code and we should endeavor to use all of them. 

Brett Swarts is considered one of the most well-rounded Capital Gains Tax Deferral Experts and informative speakers in the U.S. He is the Founder of Capital Gains Tax Solutions, is an exclusive Deferred Sales Trust Trustee, host of the Capital Gains Tax Solutions podcast and an eXp Commercial Multifamily Broker in Sacramento,CA. He will join us in a few moments and we will unpack the Deferred Sales Trust. 

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Announcements:

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News and Resources: 

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More information about Deferred Sales Trusts

Topic: Deferred Sales Trust

TOPICS TO DISCUSS 

  • Transformational Exit Planning Vs Transactional Exit Planning 
  • How to sell Cryptocurrency all tax deferred and invest into commercial real estate
  • How to eliminate the need for a 1031 exchange  
  • What are the benefits of a Deferred Sales Trust (DST) and buying real estate through the DST vs 1031 exchange? 
  • How to attract high net worth partners by unlocking their highly appreciated assets to invest into a CRE syndication with you. 
  • Estate Tax Savings! At the close of the DST, move funds outside of the taxable estate to save 40% in estate tax. How and Why? 
  • Why it’s crucial to have liquidity, diversification, debt freedom and tax deferral when selling your highly appreciated asset in a new Covid-19 economic times?
  • Top 7 questions to ask of every tax deferral strategy. 
  • DST- How do we know it’s Legal? Fees? Track Record? 
  • DST Dissolving Partnership Advantage 

QUESTIONS TO ASK  

  1. How do I sell high and wait on the sidelines and/or buy or develop real estate on my own timing all tax-deferred?
  2. How does the DST save a failed 1031? 
  3. How do I defer capital gains tax on the sale of a business or primary home and invest in commercial real estate all tax deferred? 
  4. How do I help my clients escape feeling hostage to 1031 exchange? 
  5. How do I grow my CRE Syndication Business using Deferred Sales Trust? 
  6. How do I trade toilets, trash, management for time, liquidity, diversification, and retirement?
  7. How do I build a tax deferred wealth plan? 
  8. How I helped Dave sell his $7.6M multifamily property, pay off $4.5M in debt and defer $1.1M in capital gains tax without having to do a 1031 exchange. 
  9. What is the largest wealth transfer in the history of the planet and how can the DST help to fund charitable causes with this wealth? What is a Deferred Sales Trust (DST) and why use it? 

Listener Questions

Eddie, Atlanta, GA “What is your mentoring program about?”

Quote of the Day

Today’s Quote from Michael Scott of The Office:

“I love inside jokes. I hope to be a part of one someday.”

Expected Air Date: Wednesday 10/26/2022

Guest: Brett Swarts

brett@capitalgainstaxsolutions.com

Mobile: 916-886-2986

Transcript

[0:00] You can sell a property with massive capital gains and defer your taxes by using a deferred sales trust,
For some, this is a good alternative to a 10 31 exchange. You’ll need an expert to help set this up and i have one lined up for you today on flipping America.

[0:17] Music.

[0:32] The show that teaches you how to make money in real estate wherever you are, whatever your situation, there is an opportunity for you. And now
Here’s that flipping America guy Roger Blankenship.
Thank you Kathy Curtis and hello America it’s great to be visiting with you again today it is a deep honor of mine to be.
In your life for this 30 minute period.

[0:57] Flipping America is the name of the show but we don’t encourage everyone to drop what you’re doing start flipping houses like you see on TV
We do encourage everyone to consider real estate as a part of a balanced investment portfolio.
I really like what my friend Roger Harry in the investors accountant says about paying taxes we have no obligation to,
Just sign up and pay full the full taxes the tax code has been written to give us opportunities to.

[1:31] Eliminate or defer or reduce some of our taxes by following shrude practices and that’s what we’re gonna hear about today with the deferred.

[1:40] Sales trust bretts is considered one of the most well-rounded capital gains tax deferral experts and informative speakers in the United States he’s a founder of capital gains
Text solutions
Trustee and host of the capital gains tax solutions podcast and he’s an eXp commercial multifamily broker
In Sacramento California he’s gonna be joining us in just a few moments we’re going to unpack the whole idea of the deferred sales trust what it means and how it’s.

[2:16] In many ways superior to the 10 31
Here’s how you can reach us at Flipping America. We’re on Facebook. We’re on Twitter. We’re on Instagram. You know, all that YouTube. Com slash Flipping America. Please head over there and subscribe. Our YouTube channel is new. We need subscribers and hit that notification bell,
So you’ll be notified every time we produce
Content.
437. If you press extension one, you can leave your question, your message, your comment, and look, we don’t play the comments on the show. We keep them do ourselves but we appreciate the nice things you were saying. Thank you so much. And
If you want to subscribe to our newsletter, you can do so on just about any page on our website. Flipping America. Net at the bottom, there’s a place to subscribe, or you can text the word wit to 205858 flip.

[3:11] That’s 205858,
3547 you enter your email and you’ll be subscribed to the weekly wit the wit the word wit stands for whatever it takes,
That’s our newsletter. It has the week’s real estate and flipping American news and investing tip a joke and a blessing. It’s usually about a 7 minute read and some optional links. Now, I’m getting some email from some of you about the blessings and look, I just wanna say, I,
I’m amused and sometimes truly blessed by,
Irish blessings and some of them are so sweet and some of them are goofy and some of them are formed
And I put some of the blessings at the end of this show but right now we’re doing the Michael Scott quote series,
So the blessing is an Irish blessing i didn’t write it
Except for one there’s one Irish blessing that I wrote myself all the rest are from history and so forth so if they say something goofy or something that bothers you blame the Irish person you wrote it not me and and look
They’re not intended to express my idea of correct theology either in this sense I really am just the Messenger.
And since I know you’re gonna ask which one I wrote the one I wrote is as you travel the roads of life may the police already have someone else pulled over for speeding.

[4:36] There you go,
Questions of lipping America. Net I’ve got a question that just came in today Eddie from Atlanta Georgia said what is your mentoring program about
I guess, you know, it’s a little hard for me to believe that people don’t know all about it but yeah, the truth is we don’t really talk about it that much. So, here it is.
Eddie and thank you for the question. Gives me a chance to sort of plug it a little bit. Alright, it’s,
A 1 year educational program a lifetime membership 25 online courses,
You know, life. Yours are mine. Whichever comes first. And we also do one on one coaching calls.
30 minute calls every month.
Plus you get a my cellphone number to be able to text me when you have.
Moments away and I just want to remind you that we’ve got a complete set of notes on.
On this show that goes in the show note section it said it’s a blog post on the website living America. Net or you can find information about a lot of our shows,
And we’ll say more about that.
Some other time when we have more time because my friends it is time for us to have a conversation with mr Brett’s works.

[6:05] Music.

[6:17] Brett Swartz welcome to the show.
You know we just have to dive right in and you tell us give us a definition and talk to someone.
Now I’ve got a little bit of experience as a real estate investor but I’ve never used one of these but I would like for you to talk to someone who may not even be that experience as an investor because we have a lot of new people out there.

[6:48] Yeah, you know, most most investors and and those who own businesses, they struggle with capital gains tax when they go to sell highly appreciated assets and so we typically know a 10 30.
Is just the Netflix version of the 10 31 exchange.
But it can do a whole lot of things that are just.
Frankly just better. I mean, no timing restrictions, no 45 180, you know, shotgun weddings, no having to overpay,
You know, Roger, our parents taught us to sell high and buy low, not sell behind by a higher 180 days later. And so to the extent that you can time and buy investments when it makes sense for you,
Netflix, you know, deferred sales trust makes a whole lot of sense versus the 10 31 blockbuster. And also it works for
Primary homes where is the 10301 does not work for primary homes it also works for cryptocurrency
Okay.

[7:54] When you were saying Netflix I thought is he saying Netflix and then I got it the analogy is this is Netflix compared to Blockbuster and you’re saying the 10 31 is blockbuster this is Netflix okay.
That’s fine I get that and this may obey the need for 10 31 but.
How exactly does it work let’s say i have an asset you’re starting to say it could be cryptocurrency but let’s say I have a business unit that I wanna sell and my basis in that unit is a one 1 million dollars,
And somebody has offered me five 1 million for it. So, I’m looking at a four 1 million dollars gain,
If i came to you and said what are my options here for doing this deferred sales trust can you kinda walk us through that.

[8:38] Depends on the asset so first of all if it’s a investment real estate property.
You can still do a 10 31 exchange but imagine it wasn’t. Yeah, I just said it’s a business. It’s operating business. Okay, great. So, yeah, first of all, take through it. It doesn’t work for a business sale. So, you already knock. Yeah. Blockbuster out, right?
So now the Netflix referred sales trust it works for essentially you can assign your interest prior to the close of escrow in exchange for a promissory note in that asset so let’s imagine you own it from clear,
I don’t have to do this way in advance.
No you don’t but we we recommend that you do pre plan with us any parties we don’t charge until you close Rogers but it is number two early for us and if the deal doesn’t close or you change your mind I don’t wanna use it no problem you don’t owe us anything.

[9:25] Alright
Yeah. The bit of explaining a better way to put it out. It’s like a seller careback Roger. So, let’s say you had a buyer and that buyer wanted to pay the full four 1 million to you. Imagine you carrying back 100% financing for that buyer.
And that scenario you just said a seller carryback.
And you had the buyer buy the asset from the trust so it’s really three parties you sell it to the trust the trust turns around sells it to the buyer,
Cash ends up with the trust you get a promissory note via takes the business he’s gone and you’re left as AA bank you just lent the four 1 million to the trust and exchange for a promissory note typically at eight%,
Can your terms every 10 year you can renew for 10 years but this is where the flexibility comes in you can invest where you want,
How you want? When you want, right? Back into real estate, back into businesses, into crypto, into the stock market, you can diversify. This is why it’s Netflix and not blockbush. Alright.
So, he may have jumped to step or two and you know, it’s easy for those of you who who can do calculus in your head to to,
Skip a few steps and not even realize you’re doing it. Alright. As far as I know now, I’ve turned this property over to this trust.

[10:52] Now did the buyer pay the entire five 1 million into the trust or is the buyer making installment payments.
So it was a four 1 million dollars asset sale right? Or do you sell it for five? I sold it for five. I’ve got four 1 million gain.

[11:04] Exactly. It’s all five 1 million would go into the trust if you wanna defer 100% of of the gain, right?
Okay. Now, yeah, the buyer came with five 1 million cash. So, however they showed with cash or the loan, we don’t, we’re not, you’re not gonna finance the buyer.
You’re gonna finance this across. Okay. So, I don’t need to worry so much about some sort of security instrument or what can be security for that
Hey Facebook.
To pay you back they’re not investment grade they’re typically gonna improve the property or the business in a couple years and refinance and pay you back anyways and
And you might have foreclosed on the business and take it back so we we eliminate that entire risk. Sure. Got that.
Based upon your choosing based upon dollar cost averaging.
And you don’t have to have to worry about oh no I have to go back to work on my business,
The the principal and the game and interest.
Golden egg and this scenario would be the five 1 million,
We typically don’t touch that and they live off the interest payments typically five to eight%.

[12:24] Every year and they pay ordinary income tax on the Golden Aches.
In that game paid back to me.

[12:40] It’s true if it’s your money, if you wanna receive it, and you have stuff to spend it on for personally use, it’s absolutely taxable. Well, you see, here’s the way I was thinking about it though.
Just thinking about it from the the standpoint of the time value of money. If I can if I have to take the hit and pay taxes now but I can walk walk away with a three 1 million of the four 1 million,
Dolling that out over the next 10 years I’d rather have three 1 million upfront.
I saw it in my research for the show but it didn’t really get it. So, the the trust is gonna pay me an interest rate.
And it’s just gonna be sitting on that money how is the trust going to make an eight% return on the money if it’s just sitting in a bank account.

[13:30] Oh I wouldn’t inflation what you did up so this isn’t,
And an investments are typically real estate are most of our clients are very real estate oriented and entrepreneurial businessman,
Sorry to get to a fundamental question here the trust is going to put that money somewhere.
Financial advice that we work with you have to approve of everything that they lose out your approval,
Entrepreneurial they go back into their own deals and most people don’t they don’t get it I think it’s like,
Oh no I’m giving up all this control and it’s to this financial advisor out there who just manages the capital no no no our real estate finding our real estate entrepreneur clients.
We are they are working with the trust partner with the trust to go buy deals and make money.

[14:27] I guess, okay. So,
It’s a good way to put it. Yeah, you’re like the CEO of the trust and I’m like the CEO COO which is the the trustee,
Right and there’s there’s a financial advisor. There’s a third party financial advisor and it’s a team. Hey, Roger. Here’s what we think. What do you think? Can you bring in your ideas?
And nothing ever moves out your approval or my approval. So, it does take dual approval. That’s one of the biggest things people to,
Understand and get comfortable with it. It takes a third party unrelated trustee.
You know I’m not your nephew I’m not I was your best man at your wedding it wasn’t your employee my secretary all of these things are are too much control we’re third party unrelated,
Okay,
It seems to me like if I’m making the decisions for the trust ultimately I think the Iris might think that this is just tax avoidance thing and I’m self dealing or they’ll find some other way of,
Of banning this but the solution is.

[15:39] You’re you nailed it Roger. You really really hit that. And by the way this is not unlike a 10 31 exchange. Think about that. You send it to a third party qualified intermediary
For a period of time typically 45 days to identify 180 days to close
And therefore you’re out of control you’ve indirect control they have you know they’re gonna have to send the funds back to you and you’ll pay the tax or send it to that,
A property where you’re gonna defer the tax. So, think of this like a long-term 10 31.

[16:09] Right? Whereas in the 10 31 exchange company, they’re earning the interest on the money.
Or is it 10 31 you’re maintaining ownership.
Which means you can partner with the trust.
By forming an LLC.
Client you saw the $two. 6 million business in Alabama,
And he wanted to start a new business which is building multifamily properties in Tennessee.
In the trust item back the full two. 6 million he took about six to 700 $1000 that he would have paid the government put it into a new LLC which he’s the owner of he gives up some ownership to that LLC to trust puts up all the money,
But that LLC.
Of which you can sell and get the majority of the upside into that LLC and roll that into the trusses promise sorry note number two.

[17:22] And then the rest of it rolls back into the original promise so you know,
And so now he has two. 6 million plus whatever additional gain or gain or about 80% of the gain on the LLC so this is where you can still participate in the upside and you can still be entrepreneurial with the money.

[17:38] Okay wow
Lucy, I’ve got all of this stuff up here. Is the company is, well, we’re talking about deferred sales trust.
Say it. I don’t wanna get it wrong.
Twitter.
Every way that you can follow red swarch in capital gains tax solutions. Com. It’s right there. We’re gonna take a real quick break. When we come back.
We’re gonna do the random.

[18:35] Music.

[18:43] Hey are you ready to learn this business for real.
It includes 25 home study courses inclusion at all weekend training events for life group coaching calls for life and monthly one on one calls for a full year,
Invest in yourself.
And be a part of my flipping america family for life flipping America. Net forward slash,
The third sales trust and it’s a great way to save money on taxes and i do want you to reach out to him. Look, if you guys got questions about this, I really can’t help you.
You can send them to me at these standard you know where all of you send your questions to questions of flipping America. Net but I’m just gonna forward them to him because
This is definitely not my year of fascinating and
I am seeing, you know, some potential uses. I’m gonna circle back around to that in a minute but first of all, we’re gonna get personal for a minute. I didn’t tell you this was gonna happen. It happened. I never warn her so guess. The only way you could know is you have to listen to the show to know I do this with everyone. Alright.

[19:53] They random round table of questions number one.
Hey commercial worker.
Jets like top gun, right? So, I told my parents and my,
I’ll be in the jail and I’ll perish you out until Hawaii. And the second one was I wanted to play you know basketball. And not necessarily you know forever but I mean I was 6 foot white guy. I ended up playing in college and had scholarship at a small private Christian school which is great.
But but yeah those are my kinda my two main main dreams. What school did you go to?
So, I went to two. So, one was called Point Lom and Nazarene University in Saint Alio. I know it. Yeah. Then, I went to William Jessup University. You should be San Jose Bible College in San Jose but it’s in now in Rockland Roseville, Sacramento area,
Alright.

[20:58] It’s a beautiful thing. Fantastic.
Yeah. Yeah, well, time’s a change but that’s great. Yeah, cuz I was just thinking when you were a kid wanting to be top gun
I was I was already well into my career when Tob couldn’t came out. Okay. Alright. Next question, if you could have dinner with anyone from history who would it be.

[21:25] They could be Abraham Lincoln if it was you know a person.
Or Winston Churchill those two.

[21:39] There’s a lot of talk in our entrepreneurial circles about pursuing your passion.

[21:50] You know I believe we’ve all been given certain gifts in this life and these gifts have been given us to be a blessing help to others and to the extent that we can maximize those gifts and max,
And so I’ve just focused on how do I take the strengths and the gifts that god’s given me.

[22:08] Probably maximize those gifts and how to help as many possible people as I can with those gifts and to me that that was what creates the ability to in a fulfill.
My potential, my purpose,
And and then my kids and but yeah that’s that’s kinda how that all connects.
In your personal goal setting and planning how far ahead do you typically look I wanna ask this of every successful person that comes on the show how far ahead
There’s 135 10 year goals typically is where we’re at I’m working on those you know those those 2025 year goals I’ve got we’ve got five kids and so sometimes it’s just like the weekly goals
But yeah I take 135 and 10 are the main ones 10 being the max you know and then we try to do 90 days,
To achieve the 1 year when your girls.

[23:09] Describe.

[23:17] A good question. So, we have in the miracle morning is the best practice. We I try to practice and sometimes that means it’s a little bit out of order.

[23:32] And it’s drinking a ton of water with electrolytes.
And then I try to, you know, get the quiet time in, you know, sometime midday. It depends on the rhythm of the day, depends on,
That the night of sleep you know so these things these things are not always the same with a lot of kids but yeah that’s that’s the main thing I’m gonna try to get the meditation and the prayer,
The the reading of scripture.
And those things all help me. I’m dejournaling part has been the hardest thing man. I I just you know.

[24:18] Yeah.

[24:28] So I think there’s major areas of our lives health finances, faith, family, fitness, leadership personal development.
And so to be to be wealthy you’re gonna have those areas all you know let’s say out of 10 or nine you know your your maximizing the potential of all those things and they’re they’re in sync.
With your family, with your purpose, with your your what you’ve been called to do in this earth and so you gotta make sure,
That your wealthy and all of those areas and not just in one or two and we tend to have strengths and one or two of those areas Roger and it’s kinda easy to us or it’s came easy to us so to the extent that we can you know be strong in all of those areas
To me that’s it’s true well.
Thank you you’ve survived the round table of random questions and I draw from a pool of about 12 or 15 and and those are my favorites but you did great. Alright. Now.

[25:20] You talked a little bit about wanting to be a pilot and then wanting to be a professional athlete. Your life didn’t go that way. It went a different direction. You wound up in a Christian college.
But here you are. You’re a commercial real estate broker and you do.
I still am here. I’m still EXP multipamic commercial broker. We still sell assets. Clients. This where we started at. That’s. Yeah. When all the paint oh eight crashes hit.
Right and that’s really where the DST came from.
You sort of slid into this but the it was probably not a straight line. Just take.
30 seconds and tell us a little bit about your journey from where you thought you were going to how you ended up here. The reason I I do this is.

[26:15] Almost no one ends up doing what they started out in their 20s thinking they were gonna do.
It’s always a little different. Life always throws this curve ball no one plans to be a guy that makes a living selling.

[26:32] Those rubber seals for commercial refrigerator doors but I have a friend who makes six figures doing that every year.

[26:40] Yeah you’re absolutely right. I mean going and being kind of an entrepreneurial kid in the sense that I saw my family you know build houses have rentals all my life.
And then the parents were divorced at a young age. I didn’t know that I was gonna do it. My mom had no money. My dad didn’t give her any money.
Get it all the money I live with my mom so it’s really raised by a single mom dad taught me how to work hard be an entrepreneur but it’s been much time with him so I knew at a young age I definitely wanted to have financial marginal that look like,
I like sports. I’d like people I like history like math but I wasn’t big on a lot of other subjects per se but I still got Asian bees and
Went to college, had a business degree, I got a Bible in theology degree, minor encounter in psychology, but it wasn’t until I was at Marcuston Miller chat, you know, cole calling and helping people solve problems with their real estate that I fell in love with commercial real estate and all of a sudden I’m
And it wasn’t until the pain of oh eight that I realized that oh my gosh there’s gotta be a different way than just the blockbuster 10 31.

[27:34] But during this time period, I was making next to $oh. I mean, it was tough, 100% commissioned, lived with my brother in a small condo, my wife and I, baby on the way,
It was really hard working cheesecake factory nights and weekends and so grinding through the two at 2008 to 2011 2012 time frame
You know really kind of mold it me to be where I’m at today to help people through these challenges especially with a shifting market that we’re going into and yeah you look back and you go wow now I’m in tax and this is what I do full time
Help people exit highly appreciated assets. I never knew I was gonna be here. But I’ve had a chance to learn from I think that Elon Musk was CPA’s and tax attorneys
You’re absolutely right. It’s been a journey but I wouldn’t trade any any of it right now.

[28:24] Alright we’ve only been able to touch on it briefly we’re just about out of time but.
If you.
And he is at Capitol Gaines Tax Solutions. Com and you also have a podcast that and any of us can listen to it there right?
Correct capital gains tax returns podcast capilate gains tax versus YouTube channel capital gains taxes. Com we also have the book coming out with Kevin Harrington from Shark Tank will be in the book called Building,
And it’s the proven playbook for unlocking your ideal well planned for yourself for your clients you can look for that on Amazon
Okay.
And we appreciate you taking the time to know it, learn it, explain it, and,
Do you? We’re in this series of quotes from Michael Scott of the office. Here you go.

[29:35] Thank you for listening my friends and you know what I always say at the end of every show keep your eyes
Open you’ve been listening to flipping America real estate investing for everyone listen three times a week on stations across the country or on the flipping America app free in the app store
Find and follow us on Twitter and Instagram and keep your eyes open.

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