The Albiron Deferred Sales Trust

If you are considering the sale of a business, corporation, investment real estate, or other highly appreciated assets and face capital gains tax associated with that sale and wish to defer the taxable gain the Albiron Deferred Sales Trust may be your solution.

For the investor who does not want to continue holding investment property or remain in the same business, a Deferred Sales Trust may be the answer.

According to Section 453 of the Internal Revenue Code, the Deferred Installment Trust provides investors a solution whereby they can defer capital gains upon the sale of their assets and redirect the sale proceeds into cash or whatever types of investments suit their needs, income requirements and objectives.

What is a Deferred Installment Trust?

The Deferred Installment Trust is a legal contract between you and a third-party trust in which you sell real property, personal property or a business to the trust created for you.

This is in exchange for the Deferred Installment Trust's contractual promise to pay you a certain amount over a predetermined future period in the form of an installment sale note or promissory note.

It is often referred to as a "self-directed note" because you have control over the terms of the note.

The Deferred Installment Trust gives you the ability to control your capital gains tax exposure, reinvestment terms of the sales proceeds, and installment payments made from the trust.

How Does a Deferred Installment Trust Work?

The process begins when a property or business owner transfers their asset to a trust managed by a third-party company, as Trustee on their behalf.

The third-party company acts as trustee over the asset, and the owner is the secured creditor of the trust that holds the asset.

The trust will sell the asset to the owner's buyer and manage and distribute the sale proceeds of the trust according to an agreed-upon installment contract that the owner sets up ahead of time with the Trustee.

The sales proceeds can be held in cash, reinvested and distributed according to the direction of the owner's installment contract.

There are zero taxes to the trust on the sale, since the trust purchases the property from the owner for the same price for which it is sold.

The tax code does not require payment of any of the capital gains taxes until an investor starts receiving installment payments that include principal.

The owner is then able to control if, when, and how there will be capital gains tax exposure over the installment contract period by adjusting the installment contract.

The installment contract between the owner and the trust company provides flexible options on when and how payments can be made.

Initially, the owner may have other income and may not need the installment payments right away, which would defer income and capital gains taxes.

If an owner wants income but does not want to pay capital gains taxes, he/she can set up the installment contract to pay interest-only payments from the reinvested sales proceeds.

According to IRC Section 453, this strategy can defer the capital gains tax indefinitely.