Defer Capital Gains the Smart Way W/Brett Swarts

May 5

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Episode Description

In this episode of the On The Rise Podcast, host Jeremy Dyer sits down with Brett Swarts, founder and CEO of Capital Gains Tax Solutions, to unpack one of the most powerful and least understood wealth preservation strategies available to entrepreneurs, investors, and high net worth individuals — the Deferred Sales Trust. Brett breaks down the critical differences between the traditional 1031 exchange, the Delaware Statutory Trust, and the Deferred Sales Trust, explains why the 1031 exchange puts buyers at a negotiating disadvantage, and shares real client stories of people who preserved millions in capital gains by having a plan before their liquidity event. He also addresses the three most common objections head on — legality, control, and fees — and makes the case that truly passive income, not just passive income, is the ultimate goal. A must-listen episode for anyone approaching a major exit event in real estate, business, Bitcoin, or beyond.

Summary

1. Most Investors Have a Cash Flow Strategy — But No Tax Flow or Debt Flow Strategy Brett identifies a critical blind spot in how most real estate investors think — they optimize for cash flow but have no coordinated strategy for tax flow or debt flow. Without all three working together, the timing of a sale can erode or eliminate the gains they spent years building. The Deferred Sales Trust is designed to bring all three into alignment simultaneously.

"They have cash flow. They've called cash flow king and that's the one thing they focus on. They don't have a strategy for tax flow or debt flow."

2. The 1031 Exchange Puts You at the Negotiating Table With Your Cards Face Up The traditional 1031 exchange forces buyers to identify a replacement property within 45 days and close within 180, while sellers and brokers immediately know they have leverage. A buyer in a 1031 is more likely to overpay, overlook problems in inspection, and accept unfavorable terms — simply because the tax consequences of walking away are too severe.

"It's like playing poker with your cards out. They go, 'Oh great, we've got a 1031 buyer.' And that's at least 10, 15, maybe 30 percent more."

3. The Deferred Sales Trust Is the Netflix of Tax Strategy Unlike every version of the 1031 exchange — including the Delaware Statutory Trust and the so-called lazy 1031 — the Deferred Sales Trust operates outside IRC 1031 entirely. It uses an installment sale structure with a third-party trust to defer capital gains indefinitely, with no timing restrictions, no asset class constraints, and the flexibility to hold funds in diversified investments while waiting for the right opportunity.

"This is Netflix. These people are stuck in Blockbuster. If everyone knew Netflix, why would they ever go back?"

4. The Deferred Sales Trust Works Where 1031s Cannot One of the most significant advantages of the Deferred Sales Trust is its scope. While all 1031 exchange variations are restricted to investment real estate, the Deferred Sales Trust can be used to defer capital gains on business sales, primary home sales, Bitcoin and cryptocurrency, and stock — opening the strategy to a far broader range of liquidity events.

"The deferred sales trust works for Bitcoin, businesses, real estate, and primary homes — whereas all the 1031s only work for investment real estate."

5. Truly Passive Income Is the Real Goal — Not Just Passive Income Brett draws a sharp distinction between passive income — which he argues is largely a myth in real estate due to tenant laws, insurance changes, and management demands — and truly passive income, which he defines as income that arrives without trading any time, energy, or stress for it. The Deferred Sales Trust is designed to create a pathway to that level of financial freedom.

"Truly passive income — no shoes, no shirt, no problem. The money is coming in at $40, $50, $60,000 per month and you're not trading any of your time or stress for that."

6. The Best 1031 Exit Plan — A Pressure Release Valve For investors currently in a 1031 exchange who cannot find a quality deal within the timeframe, Brett's company offers what he calls the Best 1031 Exit Plan — a structure that allows them to de-identify by day 45 and transition into a Deferred Sales Trust on day 46, preserving their tax deferral while removing the time pressure and negotiating disadvantage entirely.

"Day 46, you're in the deferred sales trust — funds are liquid, diversified, and ready to pounce on the next deal."

7. The Trust Can Act as a Joint Venture Partner on Future Deals One of the most powerful and least known features of the Deferred Sales Trust is that the trust itself can be used as a silent joint venture partner to purchase new deals — allowing investors to stay active in real estate while keeping their capital gains deferred. This turns the trust from a holding vehicle into an active investment tool.

"You can joint venture partner — the trust can be that silent partner that you invest alongside to go buy that deal. All tax deferred, no timing restrictions."

8. It Is Never Too Early — But It Can Definitely Be Too Late The Deferred Sales Trust must be set up before the close of escrow to be effective. Investors who complete a sale without the structure in place cannot retroactively apply it in the same calendar year. Brett's strongest advice to anyone approaching a liquidity event — in real estate, business, or crypto — is to engage early, build a capital gains tax exit plan, and never let the timing catch them unprepared.

"It's never too early. It can definitely be too late. You just spend five hours with us to build a capital gains tax exit plan and you can have an extra 20 to 50 percent of the proceeds."