An Installment Sale offers an opportunity for an eligible Seller to defer recognition of some or all of the gain on a disposition of qualified property. The qualified property, subject to the installment sale could be piece of highly appreciated real estate or property, or an interest in a business or professional practice. For a sale to constitute an Installment Sale, it must be a sale of qualified property where the Seller receives at least one payment after the tax year of the sale.^1,2 Each installment payment received by the Seller consists of the following three components: (a) nontaxable recovery of the investment (b) taxable gain, and (c) interest.³

A traditional Installment Sale arrangement has the Seller dependent upon the financial solvency of the Buyer for future periodic payments that the Buyer owes to the Seller. Since the Installment Sale permits the Seller to take payment in the form of a periodic payment, the Seller could potentially be at risk if the creditworthiness of the Buyer is suspect at the outset, or later deteriorates. In order to mitigate this credit/default risk, the Seller and Buyer can instead agree to consummate a "Structured Installment Sale" whereby the installment sale agreement provides that the installment periodic payment obligation will be transferred, by way of non-qualified assignment, to a third party special purpose assignment company and, will be funded with an annuity from a large, highly rated life insurer like Allstate Life Insurance Company, Allstate Life Insurance Company of New York, or The Prudential Insurance Company of America. This will help provide far greater assurance to the Seller that he or she will receive the future periodic payments when scheduled and achieve the intended tax deferral. ( **NOTE: Pru has temporarily suspended its distribution of structured sales annuities Dec. 2007)

II. Why Installment Sales?

• Defers recognition of some or all of the gain
• Guaranteed rate of return

• Concern over buyer fulfilling installment payment obligation. Seller can rely on high billions (assets of Allstate Life Insurance Company or The Prudential Insurance Company of America) instead of thousands, millions or low billions (assets of buyer).
• Concerns over investment risk for either party or no need to take risk.
• Long term financial security for seller.
• Better than stand by letter of credit, the "cash windfall" from which, if exercised, would provide security but would not help seller maintain his or her strategy to defer capital gains.

• Are you an owner of highly appreciated real estate or property?
• Are you a real estate agent or real estate broker representing an owner with highly appreciated real property who would like to sell but has a big capital gains problem?
• Are you a buyer or real estate agent or broker representing a buyer who wants to buy a property whose owner has a big capital gains problem and its been an obstacle to the sale of the real estate?
• Are you an owner or partner in a business which you started with a modest amount of money, that is worth a lot more now, and you would like to sell your business interest, yet are afraid of getting killed by capital gains taxes?
• Are you an owner or partner in a business, which you started with a modest amount of money, that you (and/or others) built up with your sweat and business acumen, that is worth a lot more now and you (and/or others) would like to get out, but are fearful of selling your business, having a a buyer default leaving you (and/or others) with the potential of unexpectedly having to again run a business that may have lost goodwill or has been mismanaged. When you retire from or sell your business you want finality.
• Are you a business broker, financial advisor, lawyer or CPA who has a client with a highly appreciated business?
• Are you selling a piece of highly appreciated property or a business interest and, do you have little immediate large cash needs and have the thought that being able to safely and securely deferring capital gains into the future (when you want it) is appealing?.

Words of Caution: Be careful that the structured sales consultant you are dealing with is in fact a structured sales consultant and presenting you with a legitimate structured sales product. As the structured settlement industry has seen with the weak but pervasive "double entendre" promoted by certain settlement transfer companies, there is an attempt by some marketing charitable remainder trusts and IRC Sec. 1031 Exchanges to characterize what they do as structured sales in Internet advertising, when "the wires may not in fact be all be connected in the same way'. Avoid cases of mistaken identity.

¹ Real or personal property sold by a dealer or a person who regularly sells property on the installment plan and property included in inventory do not qualify for the installment sale rules.Marketable securities are not eligible for installment sale treatment.Other restrictions apply.Please consult your tax advisor before entering into an installment sale agreement.

² Special rules apply to non-dealers.Please consult with your tax advisor to determine whether those rules could impact your arrangement.

³ Please note that information provided on this page is not intended as legal or tax advice. Please consult with your attorney or tax advisor on whether or not an installment sale is right for you, and how to best structure such sale.