Commercial Asset Protection Sale
How a CAPS Trust works
With a CAPS Trust structure, there is a Buyer and a Seller, just like a conventional sale; however, the business or real estate is sold to an unrelated third-party (Trust - Sale 1) which immediately sells to the Buyer (Sale 2). From a Buyer’s perspective it is seamless: he/she purchases the business under the same terms, only it is purchased from “XYZ Trust” instead of “ABC Seller”.
From a Seller’s perspective 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 (irrevocable trust) in exchange for a secured installment note. This note has flexibility of payment and terms, so the Seller can determine his/her cash flow needs on a monthly basis and structure the payments based on those needs. The note creates an income stream for the Seller, secured by the assets of the Trust, that gets taxed as the Seller receives the income similar to an installment sale, governed by installment sale tax law.
When the business or real estate is sold to the irrevocable trust, the taxes are deferred (not eliminated) for the Seller. Deferment is postponement or delay of paying the capital gains tax since the sale of the business or real estate is a taxable event. The trust proceeds can be invested in stocks, bonds, marketable securities, annuities, life insurance policies, etc. to provide income to the Seller which is paid through the note.
As an Estate Planning/Asset Protection Tool, the trust provides valuable protection of the proceeds received from the sale.
A solution to let you sell your business, put more money to work, and pay less taxes over time instead of all at once.
Pre-tax dollars are utilized over time to maximize returns.
Business Owners can sell their business and defer the taxes on capital gains for up to 20 years.
Real Estate Owners can sell Real Estate and defer the taxes on capital gains for up to 20 years.
Sellers can put up to 45% more money in their pocket.
Transactions over $1 Million.
C-corporation owners can reduce double taxation.
The CAPS Trust structure is a powerful tax reduction tool for 2 reasons:
1. The Seller receives the use of “before tax” proceeds for up to 20 years to put more money in their pocket. The Seller would normally be forced to pay 100% of the taxes in full up front. Sellers can use these funds to make money over time, even enough money to pay the taxes in the future as it is paid out of the Trust.
2. It allows the Seller to plan when the taxes are paid and take advantage of tiered tax rates. A Seller can effectively lower their tax rates on some of the tax that would have been due if the taxes were all paid at Close.
For example, we recently helped Adam and Julie defer $1.2 Million on a $5 Million sale. They now have the use of $5 Million instead of $3.8 Million. By putting their tax deferral to work, they plan to use pre-tax dollars to make enough money on their tax deferral to reduce their future tax bill.
Adam and Julie defer $1.2 Million of taxes and endorse the CAPS Trust structure
Recent successful transactions
Sell your business -
Defer the taxes
SALE OF a BUSINESS
Works with Asset, Stock, and Section 338(h) 10 Sales
All business types are eligible including:
S-Corp, C-Corp, LLC, Partnership Interests, etc.
Any business capital asset can be sold including: Equipment, Furniture, Fixtures, Personal Property and Dairy Cattle
Majority and Minority Interests are okay
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