Brett Swarts: How to Exit Bitcoin, Real Estate, or Business Tax-Free?

Imagine building a thriving business or amassing a fortune in Bitcoin, only to watch a massive chunk vanish in capital gains taxes upon exit. For entrepreneurs and investors from all walks of life—whether you're a first-generation wealth builder navigating unfamiliar financial terrain or a mid-career professional pivoting into crypto— this dilemma is all too real. In this podcast episode, Brett Swarts, founder of Capital Gains Tax Solutions and author of the best-selling book Building the Capital Gains Tax Exit Plan, shares proven strategies to defer capital gains tax and preserve your hard-earned wealth. Drawing from his experience closing over half a billion dollars in transactions, Swarts introduces the deferred sales trust as a flexible tool that empowers you to multiply freedom and impact without rigid constraints.

Understanding Your Capital Gains Tax Challenge

Before diving into solutions, it's essential to grasp the problem. When selling a highly appreciated asset like real estate, Bitcoin, or a business, capital gains tax can erode 20% to 40% of your proceeds, depending on federal rates (typically 20%) and state taxes (up to 13.3% in places like California, plus potential 3.8% Obamacare surtax).

Consider a hypothetical scenario: A young tech entrepreneur in Silicon Valley buys a multifamily property for $1 million, adds $500,000 in improvements, but depreciates $600,000 over time. Now valued at $10 million, the sale triggers about $9.1 million in gains. Without planning, taxes could claim millions, limiting reinvestment options.

Swarts emphasizes calculating your true gain: subtract your basis (purchase price plus improvements minus depreciation) from the sale price, minus closing costs. "If you don't quite know what these numbers are, that's okay. Ask your CPA, they should be tracking this for you," he advises. This step is crucial for anyone, from global investors managing cross-border assets to underrepresented entrepreneurs building generational wealth.

What Is a Deferred Sales Trust and How Does It Work?

At the heart of Swarts' approach is the deferred sales trust (DST), rooted in IRC 453 tax code for installment sales. Unlike inflexible options like Delaware statutory trusts—which lock capital in real estate for years and don't suit Bitcoin or business owners—the DST offers diversification, liquidity, and applicability to any asset.

Think of it as an IRA for multimillion-dollar exits. You sell your asset to a trust before it sells to the buyer, receiving a promissory note in return. Taxes are deferred until you receive payments, allowing the full proceeds to compound. Swarts likens it to becoming the bank: "She's become the bank. She has lent the $5 million and she is receiving payments only as she takes them."

A real-world example brings this to life. Swarts recounts a client with $5 million in Bitcoin gains (originally bought for $50,000). Facing $1.85 million in taxes, she used a DST to sell to the trust, which then liquidated via Kraken. The trust had no gain, and she deferred taxes while diversifying into stocks and a startup—an online education platform for children. This strategy suits diverse personas, like a mid-career switcher from corporate life funding a passion project or a first-generation entrepreneur preserving family legacy.

Who Benefits from Capital Gains Tax Deferral Methods?

If you're eyeing a sale with at least $1 million in net proceeds and gains, the DST could be ideal—especially if set up before closing. It's perfect for partnerships splitting ways, as in Swarts' $13 million San Diego car wash exit. Four partners built a unique venture combining a car wash with a Mexican restaurant, but post-sale, three deferred taxes via individual trusts to pursue separate investments.

For real estate lovers, combine it with 1031 exchanges. Swarts shares a Texas client's $6 million land sale: partial 1031 into properties in Oklahoma and South Carolina, partial Delaware statutory trust, and partial DST for ultimate flexibility.

Beyond capital gains, DSTs defer income taxes through interest-only payments (e.g., take $300,000-$400,000 on a 9% note for $10 million, letting the rest accrue tax-free at the trust level). They even eliminate estate taxes by moving assets outside your taxable estate—potentially saving $40 million on $100 million Bitcoin growing to $1 billion.

Reflect on your situation: Are you a remote worker with crypto holdings or a startup founder in a high-tax state? These capital gains tax strategies can unlock opportunities tailored to your background.

Common Questions on Deferring Capital Gains Tax

• How Does This Differ from a 1031 Exchange?

A 1031 defers taxes by swapping like-kind real estate, but it's limited to property and requires strict timelines. DSTs work for Bitcoin, stocks, or businesses, offering broader investment choices without deadlines.

• Can I Use This for Cryptocurrency Like Bitcoin?

Absolutely. As Swarts notes, "We had a client who had $5 million of Bitcoin... we set up a trust. And this trust first received the bitcoin, gave her a promissory note." No need to relocate to Puerto Rico—defer taxes domestically.

• What About Estate Tax Elimination?

For net worths over $30 million (married), DSTs remove assets from your estate, avoiding 40% death taxes on growth. No gifting or charity required, preserving control.

Building Your Entrepreneurial Wealth Plan

Swarts stresses a holistic approach: partner with advisors for a "fractional family office" to manage exits. His team handles multifaceted strategies, from partial exchanges to full deferrals.

For credibility, consult IRS resources on IRC 453 or Swarts' book, available at capitalgainstaxsolutions.com. Studies from sources like the Tax Foundation highlight how tax deferral boosts economic growth, aligning with entrepreneurial goals.

Challenge yourself: Calculate your potential tax liability today. What could you achieve with deferred funds—launch a venture, support vulnerable communities, or secure your family's future?

Key Takeaways and Next Steps

Deferring capital gains tax via a deferred sales trust transforms exits into opportunities for growth, diversification, and impact. As Swarts puts it, "Our goal for you is not to only just build wealth and exit smart, but also to be a steward with the capital and to help MVPs who are the most vulnerable people."

Download Swarts' free guide at capitalgainstaxsolutions.com for interviews with Shark Tank's Kevin Harrington and billionaire insights. Connect on Instagram or LinkedIn, or visit brettswarts.com for podcasts. Apply these insights: Schedule a CPA consult or explore your exit plan. Join entrepreneurial communities to discuss strategies, fostering inclusivity across backgrounds.