Skip to content
Commercial alternative investments

View our current 1031 Exchange Properties

 
CALL US NOW: 855-DST-3443

Insights Blog

Understanding Zero Coupon DST: A Smart Strategy for Real Estate Investors

Delaware Statutory Trust NNN Property

Are you a real estate investor looking for a smart strategy to defer capital gains taxes? Look no further than the Zero Coupon DST (Deferred Sales Trust). This innovative financial and tax-deferral tool can help you manage your tax liabilities while ensuring a steady stream of income. At Perch Wealth, we specialize in guiding investors through sophisticated financial strategies like the Zero Coupon DST.

What is a Zero Coupon DST?

A Zero Coupon DST combines the principles of zero coupon bonds with a Deferred Sales Trust to offer an effective tax-deferral solution. In essence, it allows property owners to defer capital gains taxes by transferring their assets into a trust before selling them. The trust then sells the property and reinvests the proceeds in zero coupon bonds. These bonds do not pay periodic interest; instead, they are issued at a discount and mature at their face value. The difference between the purchase price and the face value represents the interest income, which is realized at maturity.

How Does it Work?

  1. Transfer of Asset: First, the property owner transfers their asset, such as real estate, to the DST before the sale.
  2. Sale by DST: The DST sells the property and uses the proceeds to purchase zero coupon bonds.
  3. Income Deferral: Since zero coupon bonds do not pay regular interest, their value grows over time and matures at face value. This allows the DST to defer income and capital gains taxes.
  4. Periodic Payments: The DST structures payments to the original property owner based on the maturity schedule of the zero coupon bonds, providing a predictable income stream.

Benefits of Using a DST

Zero Coupon DST offers several compelling benefits for real estate investors:

  • Tax Deferral: By transferring your asset to the DST before selling it, you can defer capital gains taxes, potentially until the bonds mature.
  • Predictable Income: The maturity of zero coupon bonds provides a clear schedule for income payments, ensuring a steady and predictable cash flow.
  • Estate Planning: Zero Coupon DST can be an effective part of estate planning, allowing you to control the timing of income and tax liabilities, which can be particularly beneficial for heirs.
  • Market Resilience: Zero coupon bonds are generally less volatile than other investment options, offering a more secure investment during market fluctuations.

Is it Right for You?

Transitioning your assets into a DST can be highly beneficial, but it requires careful planning and expertise. Here are a few considerations:

  • Complexity: Setting up a Zero Coupon DST is complex and requires both legal and financial expertise. At Perch Wealth, we provide the necessary guidance and support to ensure your DST is structured correctly.
  • Regulatory Compliance: Ensuring compliance with tax regulations is crucial. We help you navigate these regulations to maximize the benefits of your DST.
  • Market Risk: While zero coupon bonds are generally stable, their value can be affected by interest rate changes and other market conditions. Our team at Perch Wealth monitors market trends to mitigate these risks.

Why Choose Perch Wealth?

At Perch Wealth, we specialize in helping real estate investors implement sophisticated financial strategies like the DST. Our experienced team offers personalized guidance to ensure your investment strategy aligns with your financial goals. Here’s how we can help:

  • Expertise: Our team has extensive experience in setting up and managing Zero Coupon DSTs, ensuring your trust is structured for maximum benefit.
  • Tailored Solutions: We understand that each investor’s needs are unique. We provide customized solutions that align with your specific financial objectives.
  • Ongoing Support: From initial setup to ongoing management, we provide continuous support to ensure your DST remains compliant and effective.

The Perch Take

The Zero Coupon DST is a powerful tool for real estate investors looking to defer capital gains taxes while securing a predictable income stream. By combining zero coupon bonds with a Deferred Sales Trust, investors can achieve significant tax deferral and estate planning benefits. At Perch Wealth, we are committed to helping you navigate this complex strategy, ensuring it aligns with your financial goals. Contact us today to learn more about how a Zero Coupon DST can benefit your real estate investments.

Get Started with Perch Wealth

Ready to explore the benefits of a Zero Coupon DST? Contact Perch Wealth today to speak with one of our experts. We’ll guide you through the process and help you develop a strategy that maximizes your financial potential.


By utilizing the DST, real estate investors can defer capital gains taxes, enjoy a predictable income stream, and optimize their estate planning. Let Perch Wealth help you unlock the potential of this sophisticated financial strategy.

1031 Risk Disclosure:
  • There is no guarantee that any strategy will be successful or achieve investment objectives;
  • Potential for property value loss – All real estate investments have the potential to lose value during the life of the investments;
  • Change of tax status – The income stream and depreciation schedule for any investment property may affect the property owner’s income bracket and/or tax status. An unfavorable tax ruling may cancel deferral of capital gains and result in immediate tax liabilities;
  • Potential for foreclosure – All financed real estate investments have potential for foreclosure;
  • Illiquidity – Because 1031 exchanges are commonly offered through private placement offerings and are illiquid securities. There is no secondary market for these investments.
  • Reduction or Elimination of Monthly Cash Flow Distributions – Like any investment in real estate, if a property unexpectedly loses tenants or sustains substantial damage, there is potential for suspension of cash flow distributions;
  • Impact of fees/expenses – Costs associated with the transaction may impact investors’ returns and may outweigh the tax benefits
General Disclosure

Not an offer to buy, nor a solicitation to sell securities. All investing involves risk of loss of some or all principal invested. Past performance is not indicative of future results. Speak to your finance and/or tax professional prior to investing. Any information provided is for informational purposes only. Securities offered through Arkadios Capital, member FINRA/SIPC. Advisory Services offered through Arkadios Wealth. Perch Wealth and Arkadios are not affiliated through any ownership.

Subscribe To Our Newsletter

 

Perch Wealth provides you with access to institutional-quality real estate, management, financing and state of the art 1031 exchange processing.

855-DST-3443

info@PerchWealth.com

29122 Rancho Viejo Road
Suite 111
San Juan Capistrano,
California 92675

Not an offer to buy, nor a solicitation to sell securities. All investing involves risk of loss of some or all principal invested. Past performance is not indicative of future results. Speak to your finance and/or tax professional prior to investing. Any information provided is for informational purposes only. Securities offered through Arkadios Capital, member FINRA/SIPC. Advisory Services offered through Arkadios Wealth. Perch Wealth and Arkadios are not affiliated through any ownership.

Check the background of this firm/advisor on FINRA’s BrokerCheck

© 2023 Perch Wealth.

Real Estate / 1031 Risk Disclosure:
  • There’s no guarantee any strategy will be successful or achieve investment objectives;
  • All real estate investments have the potential to lose value during the life of the investments;
  • The income stream and depreciation schedule for any investment property may affect the property owner’s income bracket and/or tax status. An unfavorable tax ruling may cancel deferral of capital gains and result in immediate tax liabilities;
  • All financed real estate investments have potential for foreclosure;
  • These 1031 exchanges are offered through private placement offerings and are illiquid securities. There is no secondary market for these investments;
  • If a property unexpectedly loses tenants or sustains substantial damage, there is potential for suspension of cash flow distributions;
  • Costs associated with the transaction may impact investors’ returns and may outweigh the tax benefits;
  • Tax benefits are not guaranteed and are subject to changes in the tax code.