Every win should last. Selling a company, closing a property deal, or realizing a strong investment is meant to feel like a reward for years of work. Yet even good outcomes need structure to stay good. Without planning, a large share of those gains can quietly slip away to capital gains taxes.
Many executives focus on the sale price and assume the hardest part is over. In truth, the decisions made after a sale often matter just as much. A transaction that looks like a clear victory, but on paper you could lose a third or more of its value once federal, state, and depreciation recapture taxes are paid. The question is how much you keep and what you can make those dollars do next.
Why Capital Gains Matter
Capital gains taxes reduce reinvestment potential. Each dollar paid in tax is one less dollar working toward future growth, philanthropy, or legacy planning. The challenge grows with layered exposure:
Federal long-term capital gains tax rate
Up to 20 percent, per the Internal Revenue Service (IRS), Topic No. 409 Capital Gains and Losses (IRS.gov, 2025).
Net Investment Income Tax (NIIT)
An additional 3.8 percent that applies to certain high-income taxpayers, per the IRS, Topic No. 559 Net Investment Income Tax (IRS.gov, 2025).
State taxes
Vary by jurisdiction; for example, the California Franchise Tax Board lists a top marginal rate of 13.3 percent for individuals (ftb.ca.gov, 2025).
Depreciation recapture on real estate
Taxed at a maximum rate of 25 percent, as outlined in IRS Publication 544: Sales and Other Dispositions of Assets (IRS.gov, 2025).
An executive selling a 5 million-dollar property could owe more than 1.2 million dollars in combined federal and state taxes. That leaves 3.8 million dollars to redeploy, and the lost compounding potential can set progress back for years.
Practical Ways to Reduce the Burden
1031 Exchanges and DSTs
When real estate is involved, a 1031 exchange allows deferral of capital gains by reinvesting proceeds into like-kind property. Using a Delaware Statutory Trust (DST*) adds flexibility and access to professionally managed, institutional-grade real estate without the operational load of being a landlord.
Installment Sales Trusts
For the sale of a business or other large asset, installment sales trusts spread gain recognition across several years. This structure helps smooth income and may reduce exposure to higher brackets.
Opportunity Zones
Investing in qualified Opportunity Zone Funds can defer and potentially reduce capital gains taxes while channeling capital toward economic development in designated areas. The longer the investment is held, the greater the potential benefits.
Charitable Trusts
Charitable Remainder Trusts and other philanthropic vehicles combine giving with planning. You can receive an immediate tax deduction, generate income for a defined period, and direct remaining assets to causes you value.
Cost Segregation Studies
Owners who keep commercial property can accelerate depreciation to offset taxable income. This strategy may improve near-term cash flow and create a tax shield for other investments.
The Case for Coordination
Each of these tools works best when coordinated. A 1031 exchange can align with charitable giving. An installment sale can pair with a Roth conversion. A cost segregation study might reduce exposure from another gain. When used thoughtfully, taxes become a variable that can be influenced, not a penalty that must be accepted.
Advisors, CPAs, and attorneys working in sync can help structure a plan that fits liquidity goals, business timelines, and family priorities.
Risks and Considerations
Tax mitigation strategies require careful evaluation. Key risks include:
- Illiquidity: DSTs, private placements, and alternative assets generally require long holding periods and lack active secondary markets.
- Tax Law Changes: Future legislative or regulatory revisions could alter expected benefits or timing outcomes.
- Suitability: Strategies involving DSTs, alternatives, or captives are typically reserved for accredited investors and should be reviewed with qualified professionals.
- Lack of Control: Investors may have limited influence over operations, financing, or disposition decisions in certain structures.
- Market Risk: Real estate values, interest rates, and private market performance can fluctuate, affecting returns and principal value.
- Sponsor or Manager Risk: Outcomes depend on the capabilities and integrity of the entity managing the asset or program.
- Loss of Principal: All investments carry risk. There is no assurance of profit, and investors may lose some or all of their capital.
Each approach should be reviewed carefully with a CPA, legal counsel, and financial professional to confirm it aligns with your financial goals, liquidity needs, and tolerance for risk.
The Executive Advantage
Preserving wealth isn’t only about what you make, but what you keep working for you. With foresight and planning, what could have been lost to taxes can remain a source of growth, income, and long-term stability.
Learn more about effective tax deferral strategies. Download our free eBook: The 1031 DST Advantage: A Strategic Tax Deferral Guide for Financial Professionals. If you or someone you know needs guidance on tax-efficient investing strategies, 1031 DST Group is here to help. Schedule a free consultation or learn more at www.1031dstgroup.com/free-consultation
Disclosure:
Portions of the written content in this article were assisted by artificial intelligence (AI) technology tools and reviewed by 1031 DST Group for quality and compliance. This material is provided for educational and informational purposes only and is not intended as investment advice or a recommendation to buy or sell any security. A 1031 exchange may not be suitable for all investors and may involve risks, including the potential for loss of principal. Always consult with a qualified tax advisor or financial professional. Some investments such as Alternative investments and DSTs involve significant risks and may be illiquid, speculative, and suitable only for accredited investors*. *Accredited investors are defined under SEC Rule 506 of Regulation D. Generally, an investor is deemed accredited if their net worth is greater than $1,000,000 exclusive of their primary residence and/or their annual income exceeds $200,000 for the current and past two years. Click here to learn more.
Ray DeWitt is a Registered Representative of Realta Equities, Inc. and an Investment Advisory Representative of Realta Investment Advisors, Inc. Investment Advisory Services are offered through Realta Investment Advisors Inc., an SEC registered investment advisor. Securities are offered through Realta Equities, Inc., Member FINRA/SIPC. Neither Realta Equities, Inc. nor Realta Investment Advisors Inc. is affiliated with C-Suite Network Or 1031 DST Group. Realta Wealth is the trade name for the Realta Wealth Companies. The Realta Wealth Companies are Realta Equities, Inc., Realta Investment Advisors, Inc., and Realta Insurance Services, which consist of several affiliated insurance agencies.
