A deferred sales trust (distinct from a Delaware Statutory Trust, despite sharing the DST acronym) is an installment-sale structure where the seller transfers property to a trust in exchange for an installment note, deferring capital gains tax.
The trust sells the property to the ultimate buyer and pays the seller over time via installment note. Installment sale tax treatment defers gain recognition to the years payments are received, spreading the tax liability. Structure is complex and requires specialized counsel.
For LA multifamily sellers considering alternatives to the traditional 1031 (particularly when 1031 timing doesn't work or when the seller wants liquidity during the deferral period), deferred sales trusts can work. Audit risk and structural complexity are real — use experienced counsel.
From the Sterman LA Multifamily Glossary — defined the way a broker with $1.41 billion across 254 closed transactions actually uses these terms.
Michael Sterman, Senior Managing Director Investments, Marcus & Millichap.
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