Introducing the DTS (Deferred Tax Strategy)

If you’re an investor considering the sale of a highly appreciated asset—be it a business, real estate, or a collection of investments—you’re likely bracing for the financial impact of capital gains taxes. These taxes can take a significant bite out of your proceeds, often leaving you with less to reinvest, grow, or pass on to your heirs. 

But what if there were a way to defer those taxes and use the pre-tax proceeds to your advantage? Enter the Deferred Tax Strategy (DTS)—a little-known yet immensely powerful tool that could help you save millions while preserving your wealth for the future. 

What is the Deferred Tax Strategy?

The DTS is a tax-deferral solution that enables you to delay paying capital gains taxes on the sale of a highly appreciated asset. Instead of paying taxes on the entire gain at the time of the sale, the proceeds are placed into a third-party trust. You receive payments from the trust over time, and taxes are only due on the principal as it’s distributed to you—not on the entire gain upfront. This approach allows you to;

• Receive control of your wealth: Access funds in a structured manner while deferring taxes. 
• Earn interest on pre-tax proceeds: Your wealth can continue to grow, working for you rather than being reduced by taxes owed at the time of the sale.
• Customize your strategy: Choose from a wide range of investment options to suit your financial goals and risk tolerance. 

Unlike more traditional tax-deferral methods, the DTS is not limited to specific asset types or reinvestment requirements, making it a versatile option for sophisticated investors. 

How Does the DTS Compare to Other Tax-Deferral Strategies?

While many investors are familiar with tools like the 1031 exchange or Opportunity Zone Funds, these strategies come with significant restrictions. The DTS, on the other hand, offers a greater level of flexibility.

DTS vs. 1031 Exchange 

The 1031 exchange allows real estate investors to defer capital gains taxes by reinvesting proceeds into another like-kind property. However, strict rules around timing and asset type can limit its applicability. 

In contrast, the DTS: 

•  Isn’t restricted to real estate or like-kind property. 
• Doesn’t impose rigid timelines for reinvestment. 
• Provides the freedom to invest proceeds into stocks, bonds, or even a new business venture. 

DTS vs. Opportunity Zones 

Opportunity Zones offer tax incentives for investing in economically distressed areas. However, they require you to hold the investment for several years to maximize the benefits, and your options are limited to certain designated areas. 

With the DTS, your investments aren’t tied to location, and you retain control over the timing and structure of payments. 

Who Stands to Benefit from the DTS? 

• The DTS is designed for investors facing significant tax events. Common scenarios include: 
•  Selling a business: Entrepreneurs exiting their companies can use the DTS to turn proceeds into a long-term income stream, minimizing upfront tax liabilities. 
• Exchanging real estate: Real estate investors can use the DTS as an alternative to the 1031 exchange or as a rescue strategy if an exchange is at risk of failing. 
• Divesting from other appreciated assets: Investors in stocks, collectibles, or other valuable holdings can use the DTS to defer taxes while flexibly reinvesting proceeds.

Typically, anyone with capital gains exceeding $300,000 should consider the DTS as part of their financial strategy.

Key Benefits of the DTS 

The DTS offers several advantages for investors looking to preserve and grow their wealth:

1. Tax Deferral and Wealth Accumulation 

By deferring capital gains taxes, you can reinvest a larger portion of your proceeds, allowing your wealth to grow more effectively. For example, selling an asset for $1 million with a $200,000 tax obligation means you’d only have $800,000 left to reinvest. Using the DTS, you defer that tax bill, keeping the full $1 million working for you. 

2. Investment Flexibility 

Unlike methods like the 1031 exchange, which restricts reinvestment options to like-kind property, the DTS allows you to diversify your holdings. You can allocate proceeds into financial markets, real estate, or even entrepreneurial ventures. 

3. Estate Planning Opportunities 

For high-net-worth individuals, the DTS can be a cornerstone of effective estate planning. By spreading out tax obligations over time, you can reduce the financial burden on your heirs, ensuring more of your wealth passes on to future generations. 

Is the DTS Right for You? 

The DTS isn’t for everyone—it requires careful planning and collaboration with experienced professionals. However, it can be a game-changer for investors looking to preserve and grow their wealth. Whether you’re selling a business, real estate, or another high-value asset, the DTS provides the flexibility, tax efficiency, and wealth-building potential that traditional strategies often lack. 

Ready to Explore the DTS Further? 

If you’re intrigued by the potential of the DTS to transform your financial strategy, take the next step. Download our free eBook, “Investor’s Guide to a Little-Known Yet Powerful Deferred Tax Strategy,” to gain deeper insights into how this tool works and how it can benefit you. 

Click below to get your copy and discover how Horizon Wealth can help you unlock the full potential of your accumulated wealth through the Deferred Tax Strategy.