The Deferred Sales Trust
How To Defer Capital Gains On The Sale Of Highly Appreciated Real Estate A unique alternative to the 1031 exchange
A 1031 exchange keeps your capital gains tax deferred only as long as you keep exchanging. The Deferred Sales Trust lets you finally sell — and still defer capital gains tax and depreciation recapture — while putting your full pre-tax proceeds to work for income and wealth transfer.
01 / The Problem Every Successful Owner Hits
The Wall At The End Of The Exchange
You built real equity the right way — buying great properties, improving them, and rolling the gains forward. The 1031 exchange did its job. It kept your capital working in the next property, and then the next.
But a 1031 only defers your gain while you keep exchanging. The moment you want to truly cash out, simplify, retire, or move your money anywhere other than real estate, the deferred tax comes due — all of it, all at once.
Capital Gains
Recapture
Income Tax
State Tax
Stacked together, 25–35%+ of your gain can disappear at the closing table — on property you spent a lifetime building.
02 / Two Ways Out
Keep Exchanging — Or Finally Step Through
Most owners believe they only have two choices: keep trading into another building forever, or sell and write an enormous check to the IRS.
There is a third door. A strategy that lets you sell your property, defer the capital gains, and reinvest your full proceeds into a diversified portfolio built for income and wealth transfer.
03 / Introducing
The Deferred Sales Trust
Not to be confused with the Delaware Statutory Trust used inside 1031 exchanges, the Deferred Sales Trust (DST) does exactly what its name implies. It defers the capital gains tax on the sale of your property, lets you customize your income going forward, and keeps your proceeds invested on a tax-deferred basis.
It is built on the installment sale provisions of IRC §453 — long-established federal tax law, not a loophole.
You Sell
You sell your appreciated property to a third-party trust in exchange for a secured installment note.
The Trust Closes
The trust sells to your buyer for cash. That funds the note — it is not a taxable event to you.
Proceeds Invest
Your full pre-tax proceeds are reinvested in a diversified portfolio, which you help direct as a secured creditor.
You Draw Income
You receive payments on a schedule you design. Tax is owed only as those installments are received.
04 / Side By Side
Outright Sale vs. 1031 Exchange vs. DST
Three ways to exit appreciated real estate — and what each one actually lets you do.
| Feature | Sell Outright | 1031 Exchange | Deferred Sales Trust |
|---|---|---|---|
| Defers capital gains tax | No | Yes | Yes |
| Defers depreciation recapture | No | Yes | Yes |
| Lets you exit real estate entirely | Yes | No | Yes |
| Diversify beyond one asset class | Yes | No | Yes |
| 45 / 180-day deadline pressure | None | Strict | None |
| Must find replacement property | No | Required | Not required |
| Customize your income timing | No | No | Yes |
| Also works for business & stock sales | — | No | Yes |
| Installment note can be inherited | No | No | Yes |
The DST is frequently used as a rescue when a 1031 exchange is failing — when no suitable replacement property can be identified inside the 45-day window.
05 / What Sets This Team Apart
Elite Real Estate. Elite Tax Strategy.
Any brokerage can list your property. Hyleri & Marc Katzenberg and the Luxe Latitudes team bring something very few real estate groups can: a formal strategic partnership that puts a sophisticated capital gains deferral strategy on the table before you ever sign a listing agreement.
Your Real Estate Team
Luxe Latitudes — Team of Compass
Led by Hyleri Katzenberg (Team Leader, licensed in CT & FL) and Marc Katzenberg. Top 1.5% in the nation, $4B+ in sales volume and 450+ closings across Greenwich, Westport, Fairfield County and South Florida.
Your Wealth Planning Partner
Davenport & Associates, Inc.
A wealth planning firm in Norwalk, CT specializing in strategies to reduce estate, income and capital gains taxes. Founded in 1997 and led by President John Davenport, a licensed estate and tax attorney in New York and Connecticut.
Trustee & Legal Counsel
Guardian DST & Tax Counsel
Kent LeFevre, National DST Trustee at Guardian DST Services, structures and administers the trust. Todd Jackson, Esq. — 32 years and $30B+ in completed transactions — provides the legal work and audit defense for the life of every trust.
The Backing
The World's Largest Residential Brokerage
Following its acquisition of Anywhere Real Estate — completed January 2026 — Compass now operates as the largest residential real estate brokerage in the world, with roughly 340,000 agents across some 120 countries and territories. Luxe Latitudes sits under that umbrella, alongside:
Coldwell BankerSotheby's International RealtyCentury 21Corcoran GroupBetter Homes & Gardens Real EstateERA Real EstateChristie's International Real Estate@properties
06 / A Better Use For Appreciated Assets
Don't Just Die With It
Most retirees hold highly appreciated assets — real estate, stock, a business — until death, so heirs receive a step-up in basis and owe nothing in capital gains tax on a later sale.
That's excellent for the heirs. It does nothing for you.
Davenport & Associates takes a different approach to wealth planning: helping clients use their assets more effectively in retirement, for both income and wealth transfer. The DST is one of those strategies — a way to sell a primary residence, commercial building, or investment property, defer the capital gains tax, customize your income, accumulate trust assets on a tax-deferred basis, and still leave the trust assets to your heirs.
Two Minutes / No Obligation
The Capital Gains Estimator
Sound too good to be true? It isn't. Find out whether the DST strategy can work for you. Tell us what you paid for the property, what it's worth today, and any depreciation you've taken — we'll estimate your capital gains exposure and tell you immediately whether you're a strong candidate.
Your estimate is private · Educational estimate, not tax advice
Figure Out Your Numbers
Estimate Your Capital Gains Tax
Answer the questions below and we'll show you what you could owe — and whether you qualify to defer it.
What are you selling?
This determines how the tax is calculated.
What did you pay for it?
Your original cost is your starting “basis.”
Capital improvements — additions, renovations, a new roof — add to your basis and reduce your taxable gain.
What's it worth today?
Your expected sale price and a few tax inputs.
Commission, transfer tax, etc.
On a long-held rental or commercial property this is often $100k–$500k+, and it's recaptured at up to 25%. Not sure? A rough estimate is (purchase price × 80%) ÷ 27.5 × years owned — use ÷ 39 for commercial. Your CPA will have the exact figure.
Where should we send your estimate?
Your results are private. We'll only reach out if you'd like to talk strategy.
By continuing you agree to be contacted about your estimate. This is an educational estimate, not tax advice.
Estimated Tax If You Sell Outright
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How we got there
Estimated tax you'd owe
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How this estimate works & disclosures. This tool provides a simplified, illustrative estimate only and is not tax, legal, or investment advice, nor an offer or solicitation. It assumes long-term holding, a top 20% federal capital gains rate plus 3.8% NIIT, 25% federal recapture on depreciation, and your selected state rate. Your actual result depends on your income, exact basis, holding period, and other factors your CPA will confirm. The §121 primary-residence exclusion is applied only where selected and assumes eligibility. A Deferred Sales Trust defers tax under IRC §453 — it does not eliminate it; deferred amounts become taxable as installment payments are received. Qualification shown here is for program screening only and is not an offer or a guarantee of eligibility.
07 / Common Questions
Deferred Sales Trust FAQ
Is the Deferred Sales Trust legal?
Yes. The DST is built on the installment sale provisions of IRC §453 — long-established federal tax law. The structure has been examined by the IRS on multiple occasions (2006, 2008 and 2019) and found compliant when properly implemented, and audit defense is provided for the life of each trust.
How is a DST different from a 1031 exchange?
A 1031 exchange defers tax only if you roll real estate into more like-kind real estate within strict 45- and 180-day deadlines. A Deferred Sales Trust lets you exit real estate entirely, diversify into a managed portfolio, and design your own income schedule — with no replacement-property requirement. It also works for business and stock sales, which a 1031 cannot do.
Is this the same as a Delaware Statutory Trust?
No — and this is the most common point of confusion, because both are abbreviated “DST.” A Delaware Statutory Trust is a fractional real estate ownership vehicle used inside a 1031 exchange, so you remain invested in real estate. A Deferred Sales Trust is an installment sale structure under IRC §453 that lets you leave real estate altogether while deferring the tax.
What about depreciation recapture on my rental property?
Depreciation recapture — taxed federally at up to 25% — is one of the largest hidden costs when selling a long-held rental or commercial property. Because the DST defers recognition of the gain, the recapture is deferred along with it. Our Capital Gains Estimator factors depreciation in directly.
Does a DST eliminate my capital gains tax?
No — and be cautious of anyone who promises that. A Deferred Sales Trust is a deferral strategy. Tax is postponed and paid over time as you receive installment payments; it is not avoided or eliminated. Deferral, used well, can be powerful — but it is not avoidance.
Can this rescue a 1031 exchange that's about to fail?
Frequently, yes. If your 45-day identification window is running out and no suitable replacement property can be found, a DST can often be used so the exchange doesn't collapse into a fully taxable sale. Timing matters enormously here — reach out as early as possible.
What size gain makes this worth considering?
The strategy is designed for meaningful taxable events — generally $300,000+ in expected capital gains on the sale and $1,000,000+ in proceeds. The Capital Gains Estimator will tell you immediately where you land. If you fall below those thresholds, we have Tax Offset strategies that may still reduce your bill.
Before You List
Know Your Number First
The worst time to learn what you owe is at the closing table. Take two minutes, run the estimate, and find out whether you're a strong candidate to defer it.