Additional Considerations

Things to Consider when setting up a Deferred Sales Trust

Depreciation Shelter: Some types of depreciation recapture may be deferred, but any excess accelerated depreciation over the straight line depreciation method cannot be deferred. Fees for setting up a deferred sales trust may be higher than those of a 1031 exchange. 

Trust Legitimacy: If a deferred sales trust is improperly managed and the IRS chooses to investigate, it is possible that the trust could be designated as a "sham trust." If a trust is labeled a sham by the IRS, the income from the initial sale is taxed as though the trust did not exist. Therefore, it is very important that Deferred Sales Trusts are established and operated according to IRS guidelines and trust law.