How is a Deferred Sales Trust different from a 1031 exchange?

A 1031 exchange requires buying replacement real property. A DST can be used for any asset type (business, stock, real estate) and gives you installment payments invested in diversified assets - not just more real estate. Much more flexibility.

Is a DST the same as a Delaware Statutory Trust?

No - completely different. A Deferred Sales Trust is a tax deferral strategy using an installment sale to a trust. A Delaware Statutory Trust is a real estate investment vehicle. The acronym overlap causes frequent confusion.

How long can I defer the gain?

You structure the installment payments over any term you choose - commonly 10-30+ years. You only pay capital gains tax on the gain portion of each payment as you receive it. This can spread a multi-million dollar gain over decades.

The IRS has scrutinized some DST arrangements. It's essential to use an experienced DST attorney who structures the trust properly with a truly independent trustee. Poorly structured DSTs have been challenged by the IRS.

What does the trust do with the sale proceeds?

The independent trustee invests the proceeds (often in diversified bonds, annuities, or other income-producing assets) to fund your installment payments. The trust structure and investments must be carefully designed to comply with tax rules.

Tax Optimization

Deferred Sales Trust

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advanced · $500K+

Sell highly appreciated assets to a third-party trust, receive installment payments over time, and defer capital gains until payments received.

Can structure for 10-30+ years.

Popular for business sales and real estate.

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Key takeaways

You sell an appreciated asset to a third-party trust in exchange for installment payments, deferring capital gains until you receive them.
Payments can be structured over 10-30+ years, spreading a large gain across time.
Unlike a 1031 exchange, it works for businesses and securities, not just real estate.
The IRS scrutinizes these, so an experienced attorney and a genuinely independent trustee are essential.

Requirements

Large capital gain event ($1M+)
Comfortable with installment payments
Work with specialized DST attorney

How to Implement

1Consult DST specialist and tax attorney
2Sell asset to third-party trust
3Trust sells asset to ultimate buyer
4Receive installment payments over structured term
5Pay capital gains only as payments received

The bottom line
A Deferred Sales Trust spreads and defers a large capital gain across years and asset types, more flexibly than a 1031 exchange. Proper structuring by specialists is what keeps it defensible.

Frequently Asked Questions

Minimum Investment

$1,000,000+ gain typically

Educational Only: This information is for educational purposes. Consult a qualified financial advisor or tax professional before implementing.

Last reviewed: April 2026

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Sources

Internal Revenue Service, Rev. Proc. 2025-32
2026 inflation-adjusted amounts (tax brackets, standard deduction, estate & gift, FSA, credits)
Internal Revenue Service, Notice 2025-67
2026 retirement plan limits (401(k), IRA, SIMPLE, catch-up)
Internal Revenue Service, Rev. Proc. 2025-19
2026 HSA and HDHP inflation-adjusted limits

Educational information only. Not financial, tax, or legal advice or a recommendation. Figures are drawn from the primary sources cited above; verify current amounts with the source before acting.