Is the IRS Patient?

It seems counter intuitive to think that the IRS wants to offer people the opportunity to reinvest capital gains in Deferred Sales Trusts that allow them to receive income off their gain without first paying the tax. However, if we look at it another way, we see how allowing this process ultimately creates more income for the IRS while helping tax  payers at the same time.

If people do not sell their real estate for fear of tax, there are no taxes on the income from the real estate agents, escrow officers, stagers, repair companies, termite inspectors, etc.  Ultimately the capital gain tax is still owed to the IRS, so they actually make more tax income by encouraging the transfer of real estate, and supporting the industry which pays its taxes as well.

While the IRS is happy about the added taxable income generated by the transfer of real estate, tax payers are also happy because they have the opportunity to downsize complicated real estate portfolios, sell real estate to pay for assisted living, and pass assets to heirs while deferring the tax for them as well.