A $2M payday: $1.3M as a lump sum, or $1.6M+* paid over time
A structured installment sale is an IRC §453 installment sale where a highly rated life insurer funds scheduled payments to you, so you pay capital gains tax as each payment arrives instead of all in the year you sell. It works for real estate, a business, the boot on a 1031 exchange and deferred attorney fees. You keep more, and the money earns interest while you wait.
Illustrative, not a quote. Based on a $2M capital gain for a high-income California seller: taking the lump sum costs roughly 20% federal + 3.8% NIIT + up to 13.3% California, about $700K of tax. Structuring it spreads the same gain across years at lower rates. Your figures will differ.
If that’s you, keep reading.
Probably not a fit if you need every dollar at closing, or your gain is under $500K. Still a fit if you’re in the top bracket every year: you defer and earn yield on the pre-tax amount instead of the after-tax remainder.
Three words, three requirements. A Structured Installment Sale is a completed sale of an appreciated asset where the proceeds are paid to you as a scheduled income stream set in the contract, so you’re taxed on each payment as it arrives instead of all in one year (IRC §453). For it to be legal, each word has to mean something specific:
The “how”
The payments have to be structured through an annuity from a life-insurance company, rather than an IOU from the buyer.
On paper, the buyer’s obligation to pay you is legally assigned to an assignment company (a signed assignment). The buyer pays cash at closing and walks away clean; the assignment company takes over the obligation and funds every scheduled payment with a fixed annuity from a highly rated life insurer.
The “what”
You’re paid in installments, a fixed schedule of income, funded by an annuity that grows tax-deferred.
The money keeps working for you before tax, and you owe tax only on each installment as it lands, never on the whole amount in a single year.
The “why it’s legal”
It is a real, completed sale, but the documents have to be signed correctly, before you close.
The key rule is no constructive receipt: you can never have the right to grab the lump sum. The installment-sale and assignment paperwork must be in place so the money is never “yours to take”, and that is exactly what keeps the deferral valid.
Most explainers only talk about the first. The second pays even if you’re in the top bracket every year.
Spread the gain into years where you’re taxed at 15% instead of the top rate. Only works if you have low-income years. If you’re always at the top rate, skip this one.
Your payments come out of up to 100% of the pre-tax proceeds. Whatever you place earns a fixed, bond-like yield for the whole term on every dollar the IRS hasn’t touched yet. You’re taxed only as each payment arrives.
Engine #2 is the exact edge a 401(k) has over a taxable brokerage account: growth on pre-tax dollars compounds faster than growth on the after-tax remainder, because you never handed a third to the government up front. Already net $1M+ every year? →
Spread the gain over years and each year’s income stays low, so more of it is taxed at 15% and under the 3.8% line, not the top rate. That’s the third-to-a-quarter drop.
You pay the tax as the cash actually arrives, on a schedule you design, not all in one hit. The IRS waits until the money is yours to take.
You’re paid on a schedule you design (the assignment company owes the payments, funded by a fixed annuity from a highly rated life insurer), from your pre-tax proceeds, at a steady bond-like yield. The money you haven’t been taxed on keeps working every year until it’s paid out.
Illustrative. Assumes a ~$200K/yr spread against modest other income; your numbers depend on income, gain, schedule, and rates. Not tax advice.
The payout rate is locked at funding. Payments depend on the assignment company and the claims-paying ability of the insurer behind its annuity. Illustrative, your numbers depend on the schedule and rates at closing.
Send me the sale price and rough basis. Within one business day I'll email you the actual number and the Seller's Guide to §453. If it doesn't fit your deal, I'll tell you that plainly.
No retainer · no obligation. Hans Goldstein, a licensed insurance agent (CA Insurance License #4273294), will contact you and may discuss insurance products, including annuities. · SMS Terms & Privacy
It’s written in the tax code: IRC §453, on the books since 1980. (Settlements run on §104; attorneys on Childs.)
Your money comes from an assignment company funded by a fixed annuity from a highly rated life insurer (A or better by A.M. Best or equivalent), on a fixed schedule. It does not depend on the buyer keeping a promise. A contract, not a handshake.
Don’t take our word for it. Hand this PDF to your CPA. They’ll confirm it in about ten minutes. The code sections are right there.
A good CPA is going to be skeptical, and they should be. The IRS has gone after versions of this. They will run it through three tests, and these three sentences answer all of them before they ask.
“The note isn’t secured by cash or a cash equivalent.”
Why they care: Reg. §15a.453-1(b)(3)(i) says a note secured by cash counts as payment, and then the whole deferral collapses. I’m an unsecured general creditor, with no rights in the annuity.
“I can’t accelerate, commute, assign, pledge, or borrow against the payments.”
Why they care: that is the constructive-receipt test in Reg. §1.451-2(a). If you can reach the money whenever you like, you are taxed on it now. Those five restrictions are in the documents.
“Nothing is held in trust for me. This isn’t a Deferred Sales Trust.”
Why they care: the economic benefit doctrine (Sproull) taxes money set aside in trust for you even before you touch it. That is the problem with a deferred sales trust. It isn’t the problem here, because nothing is set aside for you.
One more, if they ask what it is not: it is not a monetized installment sale. Those went on the IRS listed-transaction roster in 2024. And §453 defers the capital gain, not depreciation recapture, which is still taxed in the year of sale.
When most people hear “installment sale,” they think of the old-school version where the buyer pays the seller directly over time, like seller-financed real estate. That arrangement carries serious buyer-default risk for the seller and is NOT what the SIS does.
Seller financing and a structured sale both use §453, with different risks: the buyer’s default or early payoff on one side; an open legal question, an unsecured and locked payment stream on the other. See the risks of each, side by side.
The SIS keeps the §453 spread-tax benefit of the old installment sale and removes the buyer-default risk. The buyer wires the full sale price to escrow on closing day, same as any cash sale. Escrow splits the wire per the SIS rider: any cash carve-out goes to you, the rest goes to the assignment company, which immediately buys a fixed annuity from a highly rated life insurer. The assignment company becomes your obligor.
Admitted to practice before the IRS, and a California-licensed insurance producer (NPN 20602398) focused on one thing: placing the Code-based structures that let sellers and attorneys spread a big tax bill over years instead of one. Highly rated insurers only, and a straight “no” when your deal doesn’t actually fit.
Contact Hans: hans@goldsteinco.net · 213-414-2808 · CA Insurance License #4273294
