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Posted on Wed, 11/16/2011 - 05:58 AM by
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A Deferred Sales Trust (DST) is a tax deferral and asset diversification strategy that can be a compelling alternative to a 1031 Exchange for appropriate clientèle owning highly appreciated real and personal property, and businesses. Taxpayers and consulting professionals should consider this strategy if they or their clients want to defer federal and state capital gain and recaptured depreciation taxes, prefer a more diversified asset portfolio and/or more predictable income stream, and choose not to acquire like-kind replacement property. How a Deferred Sales Trust WorksOften a DST starts with a client stating “I can’t sell, the capital gains taxes are prohibitive” or “I don’t want to sell and replace with another property.” The DST helps taxpayers defer capital gains and earn income on net sale proceeds while simultaneously facilitating the diversification of their assets. With a DST, there is a buyer and a seller, just like in a conventional sale. However, the transaction is structured as an installment sale under Internal Revenue Service (IRS) Section 453 whereby the asset is first sold to an unrelated third-party trustee in exchange for an installment note with a negotiated rate of return. The trustee then sells the property to the third-party buyer, resulting in capital gain tax deferral upon the sale of the asset and a stream of income to the seller, based upon the pre-tax proceeds (instead of the diminished after-tax proceeds). Then, the trust proceeds can be invested in marketable securities, annuities, etc. Furthermore, the installment note can be structured as an interest-only note so that principal is never received by the seller and, therefore, capital gain taxes are not recognized. It can also be structured to amortize principal payments in a reasonable repayment structure. 1031 Exchange AlternativeA DST does not require a replacement property, making it an “exit and diversification” strategy, as opposed to a “like-kind” replacement strategy, in a 1031 exchange. Participating 1031 Qualified Intermediaries embed DST language in Delayed Exchange Agreements. Consequently, should the taxpayer not identify suitable replacement properties by the 45th calendar day, the gain and recaptured depreciation can be deferred in a DST. Additionally, when no properties can be acquired prior to the 180th calendar day, the capital gain is deferred by initiating a DST and wiring the funds to the newly created trust versus returning the funds to the taxpayer. HOW TO OBTAIN A FREE ILLUSTRATION OF THE TAX BENEFITS Get an illustration of how a DST works for your transaction by completing the questions found on the Deferred Sales Trust page, located at the link below. http://www.mydstplan.com/andgus MORE NEWS FROM BLUEMAUMAUGoing Green Costs Franchisees Much GreenBeing forced to buy imaginary products is just one of the nonsensical results of government policy affecting franchisors and franchisees. Good News, U.S. Hotel Profit RecoveryAccording to the new PKF Trends survey, the U.S. lodging industry produced a 12.7% profit growth in 2011. 80.5% of participating hotels enjoyed an increase in total revenue while 72.3% achieved growth in profits. The recently released 2012 edition of Trends presents data from a sample of nearly 7000 financial statements of United States hotels. For the Trends report, hotel profits are defined as net operating income (NOI) before deductions for capital reserves, rent, interest, income taxes, depreciation and amortization. Federal Court Invalidates "Quickie" Union Election Rule, For NowOn May 14, 2012, the U.S. District Court for the District of Columbia set aside a controversial final rule of the National Labor Relations Board ("NLRB") that was designed to make it easier and faster for unions to hold organizing elections. Chamber of Commerce of the United States of America, et al. v. NLRB, Case No. 11-02262 (D.D.C. May 14, 2012). Business groups are hailing the decision, but the celebration may be short lived. Because the ruling was essentially decided on a procedural point, the NLRB may seek to resurrect the rule, which creates a very short window for union elections, and leaves employers with little time to react to an organized union campaign. Field Representatives Coach Franchisees to Victory
A good coach will make his players see what they can be rather than what they are. "Live For Now" Stars Dead IconPepsiCo announced aggressive marketing plans, boosting ad spending by 20% and bringing back deceased pop icon Michael Jackson as part of a worldwide campaign. RELATED SMALL BUSINESS NEWSHot Franchise Topic: Getting a LoanIt seems like the entire franchise industry is focused on funding, and with good reason; franchise loans are still a bit challenging to secure. Production Agreements of a Supply Chain; The Other End of the RainbowMany years ago I was pulled away from my usual assignments to do a major product production tolling agreement between two of America’s larger food companies. It was a stroke of luck for me because it provided something new for my interest in multivariate risks management. Since then I have prepared many multivariate high risk agreements, and it is always an enjoyable as well as remunerative adventure. When you think of every brand as a franchise in itself, it fits perfectly into my customary practice of managing franchise relationship disconnect issues. Know the Benefits of Application Protection in Any OrganizationIt is very important to ensure proper method of data availability on time. In that case, replication needs to be adopted in order to manage current backup information and system settings so that it can deliver fast restoration of data after any kind of disaster. As we know that it is not possible to avoid any kind of natural disaster or human error; but it is always mandatory to take proper measures for application protection, so that users do not face any kind of problem related to data loss. And, data replication is found to be the only way to remove or minimize the time lapse experienced in these situations. Pepsi Wants a New GenerationEverything the light touches this year is rapper Nicki Minaj’s kingdom. From the Billboard Top 100 to the Super Bowl half-time show, and her reign is about to expand to a major role in a new ad campaign for Pepsi. A Business Plan Should be a Requirement for Buying a FranchiseVisit any website that offers advice on starting a new business or expanding an existing one and you’ll find articles and advice on the importance of writing a business plan. There are tips ranging from how to write an effective business plan to the reasons why it’s so important. |
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