How big is your tax bill?

Three numbers and you'll see what the sale costs you the year it closes, and what it costs when the gain is spread out instead.

Take the check, and $0 goes to the IRS and the state the year you close.

Sale price

Price $5,000,000

What you paid (adjusted basis)

Gain as % of price 60%

Purchase price plus improvements, minus depreciation. Don't know it? Estimate it. I'll get the exact figure from your CPA.

Loan to pay off at close

Debt $0

Paid from the proceeds at closing, so that slice is taxed now and can't be spread.

Closing costs, state, filing, income, payout

Closing costs

Commission 5.0% Escrow, title, misc 0.5% Transfer tax preset

Total closing costs

You

State Filing Other income / yr $120,000 What you're selling Payout rate 5.0% Paid out over 10 years Cash you want at close $0 Years owned / rented 15 years

Sets the §1250 estimate below. Land never depreciates; it is assumed at 40% of what was paid, which is typical for coastal California. Your county assessor publishes the real split free. Drag the depreciation slider to override.

Depreciation you've taken $0 65 or older (both of you, if married) Suspended passive losses (from this or other rentals)

Freed all at once if you sell outright (§469(g)(1)), but only in step with the gain you report if you structure (§469(g)(3)). This is the number that most often says "don't structure."

Capital loss carryforward

Offsets the 25% §1250 layer first, then the 15/20% gain.

Take the check

all of it, taxed in one year

Sale price

Closing costs

Loan payoff

Your gain

Tax

You keep

Structured Installment Sale

buyer pays cash at close · you're paid on a schedule, tax as you go

Cash at closing (after loan & costs)

Into the structure

Paid to you

Tax over years

…of which year one

You keep (today's dollars)

total over the schedule

Same yield, both sides

Both earn a year. Every dollar of interest (on the note and on money reinvested) is taxed the year it's earned at the seller's own rate (federal + state + 3.8% NIIT, about here). The only difference is the starting number.

Take the check: invested after tax

Structured: still working (incl. the unpaid tax)

Take the check, after yrs (after-tax yield )

Structured, after yrs (payments reinvested the same way)

Structured ahead by

in today's dollars

The honest part

taxed the year you close spread over the schedule

Tax difference

The third option nobody shows you: elect out (§453(d))

Take the payment schedule, report the whole gain now

Structured, reported as paid

Structuring saves

Year by year

Year	Paid to you	Interest	Principal	Gain recognized	Tax on gain	§453A	Balance

Send Hans your price + basis → exact numbers in 24 hours Call 213-414-2808

Prepared by Hans Goldstein · Goldstein & Co. LLC · 213-414-2808 · hans@goldsteinco.net

How this is computed. Gain = price − adjusted basis − closing costs. Under IRC §453 the gain is recognized as payments are received, at the gross-profit ratio (gain ÷ price). Debt paid off at closing, closing costs paid from the proceeds, and any cash you take are payments received in the year of sale and are taxed then; §1245 recapture is ordinary income in the year of sale (§453(i)); unrecaptured §1250 gain is recognized first (Reg. §1.453-12) at a 25% federal cap. Federal 2026 brackets, 3.8% NIIT and the standard deduction are applied on top of your other income; state tax uses your state's rate on gains (California progressive incl. the 1% surtax over $1M; Washington's 7% excise above the exemption on business/stock sales, with real estate exempt). Payments are a level annuity at the payout rate (the first payment is modeled in the year of sale; a schedule that starts 12 months out shifts a little tax one year later); brackets are held at 2026 levels for every year (no inflation indexing, which is conservative); interest is ordinary income when received and is not counted against the sale. §453A interest applies when installment obligations over $5M are outstanding at year end (the test aggregates all your installment notes, but only this sale is counted here; 7% §6621 rate as of Q3 2026). "Today's dollars" discounts the tax stream at the payout rate. Not modeled: AMT, related-party or dealer sales, entity-level allocations. Rough estimate, illustration only; not tax, legal or investment advice. Payments are obligations of an assignment company, funded by a fixed annuity from a highly rated life insurer; they depend on the assignment company and the insurer's claims-paying ability; rates are illustrative. Hans Goldstein is a licensed life & annuity producer (CA 4273294, NPN 20602398) · Goldstein Insurance Services, CA org. lic. 6016830; not an investment adviser.