A Deferred Sales Trust (DST) enables individuals to defer capital gains taxes on large sales transactions. Instead of paying taxes upfront upon selling an asset like property, sellers transfer the asset to a trust, which then sells it to the buyer. Sellers receive a promissory note from the trust, agreeing to installment payments. This differs from a 1031 exchange, another tax-deferral strategy primarily used in real estate transactions, where assets are exchanged directly between buyer and seller, DST transactions involve an intermediary trust. Both DST and 1031 exchanges offer tax-deferral strategies for high-value assets but operate differently, providing distinct features and options for tax management.
source: https://capitalgainstaxsolutions.com/understanding-how-a-deferred-sales-trust-works/
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