Enter your deal. The whole walk-through runs on these, and you can change them anytime during the demo.

Gain $0 = price − basis − closing costs · adjusted basis $0 after $0 of depreciation (your CPA has the exact figure; it barely moves the answer) · §121 excluded $0 (principal residence, but §121(d)(6) does not shelter the depreciation, so the §1250 layer is still taxed) · gross-profit ratio 0% · taxed the year you close: $0 (assumed debt above basis + closing costs paid from proceeds + cash taken, × the ratio) · structured: $0 · is not modeled here, so state tax is shown as $0 · §453A interest charge (note over $5M at year end): $0 over the term, included in every number here

§1245 of $0 is due in year one no matter what the note says. §453(i) pulls ordinary recapture out of the installment method entirely and taxes it in the year of sale, at ordinary rates, not 25%. Structuring does not defer it, and it shrinks the cash you have at closing to pay it with. Only 100¢ of every dollar of gain here is actually structurable.

The note pays you $0

On this deal §453 costs $0 MORE than selling outright. Shortening the term alone does not fix it. The charge follows the balance, not the years.

Right-size the note and this deal is worth $0 more. Structuring the whole $0 triggers a §453A interest charge of $0 over 0 years. §453A(c) only charges the balance above $5M, so structuring $5.0M and taking the other $0 as cash at closing removes it entirely: . The gross-profit ratio does not change: cash taken at closing is a year-of-sale payment taxed at the same 0%, so this is purely a question of how much you structure, not of how the gain is figured.

Hold back about $0 as cash at closing. Your year-one tax is $0 because assumed debt above your basis, the closing costs and any cash you take (including a loan paid off at closing) are all payments received in the year of sale, and their share of the gain is taxed then whether or not the money reached you. Structure everything and 100¢ of the gain rides the note, but nothing from the deal is there to pay that bill. You do not have to carve it out of the sale. Pay it from other funds and the note stays whole; hold it back at closing and the deferral is 100¢ instead. Same tax either way; only the source of the cash changes.

Unrecaptured §1250 of $0 does spread. It is capital gain with a 25% ceiling, not ordinary income, so §453(i) never touches it. It is reported as payments arrive, ahead of your 15/20% gain, which means the early years are taxed harder than the late ones.

Rough estimate · illustrative & educational only. Not tax, legal, or investment advice. Your CPA runs the exact figures.