Updated over 4 years ago on .
What is the Deferred Sales Trust with Seth Greene
Seth:
What is a deferred sales trust? Because I'm sure a lot of our listeners haven't heard of that before.
Brett:
A deferred sales trust is a manufactured installment sale to specialize in an installment sale, your listeners may know it as a seller carry back.
Seth:
Okay, and what does that in layman's terms?
Brett:
So, Seth, if I'm going to buy a deal from you for $10 million, imagine that a zero basis and your 4 million in tax if you don't do some kind of tax deferral, I may come to you, Seth, say I'm gonna give you a $3 million downpayment, would you carry a note for seven? And you say yes, and that's the scenario, Seth, you've received 3 million an actual receipt, therefore, you owe tax on that three. But that other seven is what's called a deferral, it's a seller carry-back, you became the bank and you carried paper. Therefore, until and if I pay you back that seven, you're in a tax deferral state, the taxes, the capital gains tax is not triggered.
Seth:
And then obviously, instead of paying it all at once, let's say you were paying me a million a year for seven years, I would pay that tax only on that portion every year over time.
Brett:
You got it. And so you're gonna pay it in a pro-rate pro-rata amount, which is generally why someone might do a seller carry-back so their incomes not through the roof on any one particular year.
Seth:
Okay, and how did you how did this come about for you? How did you discover this? How did you start this business?
Brett:
2008, something happened, Seth, your listeners might know about it. But let me back up two years before that, I started Marcus and Millichap helping people buy and sell commercial real estate in Sacramento, California, mainly multifamily. And I saw the blood in the streets when everything hit the fan and people lost a lot. And some lost at all with with with their finances. Part of the challenge was what's called the 1031 exchange. And for your listeners, that's just a strategy where you can trade a piece of real estate for lifetime real estate, to defer capital gains tax. But people were selling these record numbers in oh five and oh six, and they were really excited. They were glad to get those numbers. But then they had to turn around and buy and overpay for properties and take on debt. And that debt became a place where they got hurt. So after the aftermath, and everything hit in 2009, I learned about an alternative called a deferred sales trust. And I said, What is this? Why haven't I heard about it? This seems like it's too good to be true. How do we know it's illegal. And I started to study the structure. And my manager at the time brought in a gentleman who spoke on the structure who's now my business partner. And essentially, I started to learn about it and started to study and I have my series 22, my series 63. But here's the key, I was looking for ways to help my clients solve problems, problems beyond the 1031s problems of feeling trapped by capital gains tax, okay. According to the American Bankers Association, there are $17 trillion sets that will pass from one generation to the next and the next 20 years. And this is known as the largest wealth transfer in the history of the planet. And in 2008, a lot of those baby boomers lost a lot. And so fast forward, we're there 10 years older, and they're looking for solutions to retire from the toilets, trash, and liability, without getting completely wiped out with 30 to 50% of their game. So this fits such a need for people who want to be more passive, who want to pay off debt, who want liquidity. I couldn't help but launch this company to educate as many people as I can. Awesome.
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