Selling a business is a milestone. For many, it’s the endgame after years—sometimes decades—of work, risk, and reinvestment. But the payout isn’t always as clean as it looks. Because after the check clears? Here come the taxes.
Capital gains can take a hefty bite. Federal rates. State rates. Maybe Net Investment Income Tax. It adds up—fast. That’s where high-level strategies like the 453 Deferred Sales Trust Powered by Pennington Law come in. They’ve been around for a while, but recently, more founders, real estate investors, and business owners are paying attention.
Here’s why.
The Tax Problem Most Sellers Ignore Until It’s Too Late
Let’s say you sell your company for $10 million. Sounds great, right? But depending on where you live, you could be facing a combined tax bill of 30–40% on that gain. That’s $3–4 million, gone.
It’s not illegal. It’s not even unfair. But it is avoidable—legally.
Deferred Sales Trusts (DSTs) offer a way to sell now, pay later. They’re built on Section 453 of the IRS code, which allows for installment sales. The core idea: defer recognizing gains, stretch out tax liability over time, and keep your capital working in the meantime.
So How Does It Actually Work?
In simple terms: you don’t sell the asset directly. You sell it to the trust. The trust sells it to the buyer. The proceeds go into that trust, not straight to you.
You don’t get taxed until you start taking distributions. Meanwhile, the money inside the trust can be invested—stocks, real estate, private equity, whatever suits your goals. It’s not hidden. It’s not offshore. It’s just smart structuring.
With the 453 DST structure, sellers don’t just dodge an upfront tax hit—they create an income stream, preserve liquidity, and gain flexibility for future investments. Retirement income? Covered. Legacy planning? Easier. Diversification? Built in.
Why Not Just Use a 1031 Exchange?
Different tools, different use cases.
1031s work well for real estate. But they’re strict. Same-kind asset rules. Tight timelines. No exit without another purchase. Plus, 1031s don’t help if you’re selling a business, crypto, or highly appreciated stock.
The DST route is broader. It works with real estate, sure—but also business interests, primary residences, collectibles, anything with capital gains. That flexibility is why it’s becoming the go-to option for founders and investors looking to cash out without being cornered by the IRS.
Who Actually Uses This?
Not just billionaires. DSTs are showing up in mid-market deals more and more.
Think:
- Business owners selling after a merger or acquisition
- Real estate investors liquidating high-gain properties
- Tech founders exiting after a successful funding round
- Families selling appreciated assets as part of an estate plan
It’s especially attractive for anyone who doesn’t need all the cash today—but does want more control over how and when it’s taxed.
What About Risk?
There’s always risk when dealing with tax strategy and investment planning. But DSTs aren’t some fringe loophole. The IRS knows about them. They’re built on existing tax code. The key is working with specialists who don’t cut corners.
A properly structured 453 Deferred Sales Trust Powered by Pennington Law isn’t some DIY scheme—it’s a customized, compliance-first solution backed by legal and financial teams who’ve been in the trenches.
If you’re not getting qualified advice, yes—it can go wrong. If you are? It’s a powerful, court-tested tool.
When to Start the Conversation
Here’s the big mistake: waiting until after you’ve sold.
To use a DST, it has to be set up before the sale closes. Once the money hits your account, game over—you’ve triggered the tax event. That’s why the best time to explore this strategy is as soon as you’re even thinking about a sale.
It doesn’t mean you have to use it. But getting the structure in place means you can if the deal moves forward. No pressure. Just options.
Why It’s Gaining Momentum
There’s a reason more estate attorneys, CPAs, and M&A advisors are talking about DSTs. Taxes aren’t going down. And with greater marketers cashing out of startups, rolling over actual estate, or without a doubt rebalancing after a protracted bull run, flexibility is key.
Add to that the want for profits planning, portfolio diversification, and long-time period security—and suddenly, deferring a tax invoice at the same time as maintaining your capital invested seems like greater than only a clever move. It looks necessary.
Final Thought
The sale of an asset isn’t the finish line. It’s the start of a new financial phase. And how you handle that moment—especially the tax side—can shape everything that comes next.
DSTs aren’t for everyone. But for those sitting on large, taxable gains and looking for a smarter way to structure their exit, the 453 Deferred Sales Trust Powered by Pennington Law might be the most important conversation they haven’t had yet.
Sell smart. Keep more. Plan ahead.
