Forget the Taxes: How to Sell Any Asset and Pay $0 in Capital Gains

If you’ve been following my journey at The Lifestyle Investor, you know I have one core mantra: It’s not about what you make; it’s about what you keep. That’s why, in my opinion, a world-class tax strategy is the most important skill you can have. Why? Often, a sophisticated tax move can save you more than any single investment. Whenever I talk to high-net-worth families and entrepreneurs, I ask them what they really want. Almost always, the answer is passive income.

Brett Swarts knows this all too well. When it comes to capital gains tax deferral, Brett is an absolute surgeon. He spent years in the trenches of commercial real estate at Marcus & Millichap, lived through the 2008 crash while working at the Cheesecake Factory, and emerged as a specialist in “The Deferred Sales Trust”. With his expertise in capital gains tax deferral and as the founder of Capital Gains Tax Solutions, Brett equips clients and advisors with proven strategies to defer millions of dollars in taxes.

Basically, if you understand how it works, you can align investments, income, and lifestyle to create freedom rather than friction. So, in this post, we’ll peel back the curtain on three unique strategies, and one “Netflix” version of tax planning that is a game-changer.

The Three Pillars of Tax Deferral

If you want to keep your exit proceeds, you must understand the tools available to you. In general, CPAs are aware of the first; some are familiar with the second, but very few understand the third.

1. The 1031 Exchange (The “Old School” Way)

This is what we call “Blockbuster.” It’s a commodity. If you’re selling investment property and want to buy more right away, this strategy works well. The problem is that it’s rigid. You have 45 days to identify a property and 180 days to close. As a result, the likelihood of finding a deal that makes sense in this high-interest environment is slim, so you’re forced to buy a bad deal or pay the tax.

2. The Delaware Statutory Trust

Even though the Delaware is “truly passive,” it has its own handcuffs. Typically, you’re locked up for 7 to 10 years with no control or liquidity. Although it’s better than paying a 40% tax bill in California, you’re basically a passenger on someone else’s boat.

3. The Deferred Sales Trust (The “Netflix” Strategy)

Brett and I believe this is the most transformative strategy for families. In contrast to the 1031, which works only for real estate, a Deferred Sales Trust is suitable for:

• High-end primary residences
• Businesses and Private Equity exits
• Cryptocurrency (Bitcoin/Ethereum)
• Artwork and Collectibles

How the Deferred Sales Trust Actually Works

You can think of the Deferred Sales Trust as a combination of a business trust and “installment sale reporting.”

Suppose that you own a building valued at $10 million with a zero basis. In a high-tax state like California, you might lose $4 million in capital gains and depreciation recaptures. As opposed to taking cash, you exchange the asset for a promissory note from the Trust. After the Trust sells the asset for $10 million, it transfers the money to the final buyer.

Buying it from you for $10 million and selling it for $10 million means there is no gain for the Trust. The $10 million sits in a liquid account (like Charles Schwab) where it can be invested. Rather than paying taxes on the principal of the promissory note, you receive payments over time.

The Three “Secrets” of the DST

There’s a common misconception that the DST is just about deferring capital gains. This is just the tip of the iceberg.

Secret #1: The Income Tax Compounding Effect

When that $10 million is in the trust, it earns interest (let’s say 9%). If you don’t need that $900,000 in a given year, then don’t take it. In the same way as an IRA, that money grows tax-deferred. Even better? You’re compounding not just your principal, but also the money you’d have had to pay to the IRS.

Secret #2: Resetting the Depreciation Schedule

For real estate investors, this is the “Holy Grail.” In most 1031 exchanges, your old depreciation schedule stays behind. When you’ve already “depreciated out” a building, there’s no tax break for the next one.

Using a DST, you can sell your asset, defer the tax, and then purchase a new asset with the trust. With this structure, you can get a brand-new, fresh depreciation schedule (for about 80% of the value). That means you can “sell high” and wait to “buy low” without the 180-day 1031 deadline looming over your head.

Secret #3: Eliminating the Estate Tax (The 2.0 Version)

You may be subject to the “Death Tax” if you own a massive estate valued at $20 million, $100 million, or more. As you’ve probably seen in “Yellowstone,” the family struggles with the fact that the government will take half the land when the patriarch dies.

As a result of the DST 2.0, the asset is removed from your taxable estate. Not only does it defer capital gains, but it also eliminates the 40% estate tax forever. Also, there’s no need for life insurance or complex gifting.

Dealing with “Debt Over Basis”

We have to be intellectually honest: every strategy has an Achilles’ heel. In cases where accelerated depreciation is used, and debt exceeds your adjusted basis, the DST cannot defer that specific “boot” portion.

We use a hybrid strategy in these cases. To satisfy the debt requirement, we might do a partial “Delaware 1031” into a zero-coupon deal (like an Amazon warehouse), while putting the remainder of the equity into the Deferred Sales Trust.

Moving from a Cash Flow Mindset to a “Tax Flow” Mindset

Investors typically operate with a Cash Flow Mindset. Their attention is focused on the check they receive every month. In contrast, the truly wealthy consider tax flow and debt flow when making decisions.

They ask:

• What is the government’s share of this check?
• What is the impact of my debt on my tax liability?
• To create a season of tax-free growth, how can I use the IRS code?

It doesn’t matter whether you own a business you’ve built for 20 years or a Bitcoin stash you bought for pennies, don’t let tax tails wag your investment dog. To avoid a tax bill, you don’t have to stay in “Blockbuster” property. Buying back your time is possible with “Netflix,” getting liquid, or diversifying into private debt or equity funds.

Conclusion

From the Cheesecake Factory to managing billions in deferred assets, Brett’s journey shows the value of finding a tax expert who knows the code. By eliminating taxes, we’ve seen families double their cash-on-cash return.

Tax strategy is transformational. After all, it’s the difference between working with your money and working for it (and the government’s money, too).

Key Takeaways

• Tax strategy can outperform investments. Well-structured exit plans can save or defer more than years of strong investment returns. Ignoring a tax
• Start with lifestyle goals, not tactics. Your best strategy depends on what you value most: time, passive income, flexibility, or legacy. Tactics only make sense after priorities are clear.
• 1031 exchanges are useful—but limited. Often, they require investment real estate to be reinvested within strict timelines, and they lock investors into continued debt and aging depreciation schedules.
• Delaware Statutory Trusts offer passivity, not flexibility. Although DSTs can reduce management burden, they typically offer lower returns, long lockups, limited diversification, and no liquidity or control.
• Deferred Sales Trusts expand what’s possible. With a Deferred Sales Trust, you can invest in real estate, businesses, crypto, stocks, and more-while maintaining liquidity, diversifying, and controlling taxes.
• Tax deferral compounds freedom, not just money. By deferring capital gains and income taxes, investors can grow their assets faster and delay income until they really need it.
• Resetting depreciation can dramatically boost after-tax cash flow. A Deferred Sales Trust often unlocks meaningful tax shelters for future income, unlike a 1031 exchange.

Are you ready to see how a Deferred Sales Trust could change your exit? Reach out to our team at LifestyleInvestor.com and let’s find your big domino.

Featured Image Credit: John Guccione www.advergroup.com; Pexels: Thank you!