While Installment Sales of real property, businesses, and collections are long established and understood by most tax professionals, Structured Sales and the concept of utilizing an assignment company and an annuity to guarantee payment may be new to many professional advisors including CPAs, attorneys, financial planners, and other insurance professionals.
As discussed below, a Structured Sale is simply an Installment Sale with a substitution of obligor and considerable legal authority exists to validate the process by relying on Installment Sale rules and case law.
First of all, under the long-standing provisions of IRC 453, Installment Sales are allowed for the disposition of a broad list of appreciated assets including all types of real property, privately and closely-held businesses, wine collections, art collections, classic cars, and even baseball card collections.
Second, the aspects that are specifically important to Structured Sales such at concepts of “substitution of obligors" and “constructive receipt" provisions are treated under:
- Revenue Ruling 75-457
- Revenue Ruling 82-122
- Wynne v. Commissioner, 47 B. T. Z. 731 (1942)
- Cunningham v. Commissioner, 44 T. C. 103 (1965), acq. , 1966-2 C. B.4 Constructive Receipt is Avoided
- Treas. Reg 1.451-2(a)
- Commissioner v. Tyler, 28 B. T. Z. 367 (1933)
In conclusion, if your clients have a personal residence, second home, investment / commercial property, a business, or a collection that they wish to explore deferring all or a portion of the potential taxable capital gain, you owe it to them to consider a Structured Sale in your analysis of their potential sales and tax strategy.
As the national experts on Structured Sales, and the leaders in objective analysis of the broad spectrum of appreciated asset strategies, we welcome any questions you may have regarding the Structured Sale and look forward to helping you evaluate and develop a strategy for tax deferral and wealth preservation for your clients.