October 4, 2021
Best Ever CRE Team

Using a Deferred Sales Trust to Sell Bitcoin

For generations, it was thought that running the mile in under four minutes was impossible. Then on a cold, rainy day in 1954 in Oxford, England, Roger Bannister completed a mile race in 3 minutes and 59 seconds, accomplishing what many people thought was impossible. The record only lasted 46 days before it was broken again. When people saw that it was achievable, it inspired others to believe that they, too, could succeed.

For me, there was a similar record shattered in 2021. It gave me the belief I needed to shift how I help Bitcoin owners defer capital gains tax and invest in real estate without using a 1031 exchange.

Deferring Capital Gains Tax Using the Deferred Sales Trust

With highly appreciated Bitcoin, Ethereum, XRP, Cardano, or other cryptocurrencies, knowing your capital gains tax implications before selling is important. Many individuals feel trapped by 30% in capital gains tax because they don’t have a strategy to defer it. They may also be unaware of their options. The Deferred Sales Trust™ (DST) can allow you to defer hundreds of thousands to millions of dollars in taxes if or when you sell your cryptocurrency. No deal is too big for the DST; however, the minimum-size deal typically starts with at least $1M in gain and $1M in net equity.

Let’s say you own at least a $1 million stake in Bitcoin and the gain is around $1 million. The capital gains tax could potentially exceed $300,000. A Deferred Sales Trust can be used to defer capital gains tax on the sale of Bitcoin.

Before the first Bitcoin and Ethereum DST transaction closed in August of 2021, the Deferred Sales Trust had already helped thousands of individuals defer this capital gains tax, giving a larger “nest egg” for future investments. The net proceeds received from a cryptocurrency sale can be invested in business ventures, real estate, hard money lending, ground-up development, mutual funds, stocks, REITs, insurance, and much more.

Overview of the Deferred Sales Trust

A Deferred Sales Trust is a business trust that employs an IRC §453 tax approach. It enables owners selling highly appreciated assets to use a traditional installment sale to defer capital gains realization. Since 1996, the DST has maintained a proven track record of success in helping investors and business owners defer capital gains tax and unlock equity into cash flow.

Prior to deciding to move forward, it’s critical to have a no-cost consultation with a Deferred Sales Trust expert. The primary objective of this meeting is to assess your position, address any questions you may have, and determine whether the DST is a good fit for you.

A reasonable rule of thumb is that the asset you’re selling should have a net profit of at least $1 million and a gain of at least $1 million. If you decide to proceed with the DST for your cryptocurrency sale, your next meeting will be with a DST trustee, a DST tax attorney, and a registered investment advisor.

You can also invite others to this meeting, including your:

  • CPA
  • Real estate broker
  • Business broker
  • M&A attorney
  • Independent attorney

Collectively, you and the above parties will meet to examine whether the DST is a viable option for your proposed sale. Your financial and next business or real estate venture goals will also be discussed, as well as your risk tolerance for investments and the payment amounts you wish to receive when the funds are transferred to a DST bank account.

If a DST is a good fit for you and you’re ready to move forward, the DST tax attorney will form a DST, and the team will work with you and your representatives to transfer your Bitcoin to the newly formed DST.

In exchange, you will receive a DST installment note with scheduled pre-agreed installments. Following the completion of the disposition of the Bitcoin, the “sale profits” will be directed to the DST. This allows you to avoid taking constructive receipt and put the proceeds in a tax-deferred account, similar to an IRA or a 1031 exchange.

Understanding Constructive Receipt

You must transfer your Bitcoin to a unique DST that is exclusive in its business dealings with you. To avoid constructive receipt, you will not receive the cash and therefore defer your capital gains tax. Once the Bitcoin is transferred to the DST, the DST can now sell the coin on the open market. As a result, when the final transaction is completed, the DST receives the “selling money in U.S. dollars,” not you. This is what prevents you from receiving actual or constructive receipt of the funds, which is the foundation of an installment sale and allows you to defer the capital gains taxes.

From here on out you will work closely with your DST team to execute the investment plan based on your needs, wants and risk tolerance, and the payback of your money.


Your DST trustee administers all parts of the DST after closing, but only if you authorize them to. For example, when you sell an asset to the DST, the firm has the funds transferred to a specific DST secure bank account that requires your signature, the firm’s signature, and the signature of the bank officer to open. It’s similar to having a long-term escrow account. This is the account from which the DST buys investments you authorize it to buy and has the bank make payments to you according to the terms of your installment contract, with your agreement.

Two Questions to Determine If the DST Is a Good Fit For You

1. Do you have any highly appreciated assets that you’d like to sell, delay the tax, diversify the money, and then invest in tax-deferred real estate or securities?

2. What would it mean to you to convert your highly appreciated asset — which may or may not be providing any or enough cash flow — to cash flow from passive or active real estate or other investments?

About Brett Swarts:

Brett Swarts is considered one of the most well-rounded Capital Gains Tax Deferral Experts and informative speakers in the U.S. He is the Founder of Capital Gains Tax Solutions and host of the Capital Gains Tax Solutions podcast.

Disclaimer: The views and opinions expressed in this blog post are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.

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