Advice Needed on Using a Deferred Sales Trust for Primary Residence Sale

[Darron Chadwick]

Hello BP Community,

We're under contract to sell our primary home in Indiana, and I could really use some advice on tax strategies—specifically, a Deferred Sales Trust (DST).

Here are the key details:

• Purchased in 2010 for $499K

• Under contract to sell for $2.499M (closing scheduled for December 2, 2025)

• Current mortgage balance: $94K

• This leaves us facing a sizable potential tax burden.

From my research, a Deferred Sales Trust seems like the only option to mitigate the tax hit. But I have a few concerns and questions:

1. 1. Since this is our primary residence, how does a DST interact with the $500K capital gains exclusion?

2. 2. We will need to use a portion of the proceeds ($800K–$900K) to purchase a new home. Is it possible to access part of the proceeds for that purpose while still using a DST for the remainder?

3. 3. Could funds in the DST also be used later to purchase a small condo in Florida (as a second home or investment)?

4. 4. What are the pros and cons of using a DST in this specific situation?

5. 5. Are there alternative strategies we should consider given that this is a primary residence sale and not an investment property?

We're really just looking for input from people who've gone through this process, or who can shed light on whether a DST is even the right tool here.

Thanks in advance for any advice or experiences you can share!

—Darron