A real estate broker sent you here because their seller is facing a large capital gain on a sale, and the tax hit is stalling the deal. We structure the sale under IRC §453 so the gain is recognized as payments are received over a schedule the seller chooses, instead of all at once. This page is for you, their advisor: the authority, the mechanics, and how it fits alongside a 1031 or a FIRPTA situation. You keep the client and the tax file. We build and place the structure, and we coordinate with you on every case.
Most of what gets pitched to your clients under “§453” deserves the skepticism. The IRS has proposed making monetized installment sales listed transactions (Prop. Reg. §1.6011-13, 2023; not yet final), and Deferred Sales Trusts have their own problem, below. So rather than ask you to take our word for it, here are the three doctrines you would test this against, each one named, with the citation and the point where it would kill a deal.
What this is: a seller-financed installment sale under §453 where the future-payment obligation is assigned to a rated carrier’s assignment company and funded with an annuity. What it is not: a monetized installment sale (M453), and not a Deferred Sales Trust.
Treas. Reg. §15a.453-1(b)(3)(i) provides that “payment” does not include the buyer’s evidence of indebtedness, whether or not guaranteed by a third party. The same regulation is where a deal dies: an obligation “secured directly or indirectly by cash or a cash equivalent, such as a bank certificate of deposit or a treasury note,” is treated as payment.
How we clear it: the seller is an unsecured general creditor of the assignment company and holds no rights in, and no security interest against, the annuity.
Treas. Reg. §1.451-2(a): income is constructively received when “credited to his account, set apart for him, or otherwise made available so that he may draw upon it at any time,” but not where control is “subject to substantial limitations or restrictions.”
How we clear it: the seller cannot accelerate, commute, assign, pledge, or borrow against the payment stream. Those five restrictions are in the documents, not in a brochure.
Under the economic benefit doctrine (Sproull v. Commissioner), funds irrevocably set aside for a taxpayer’s sole benefit are income now, even with no constructive receipt.
How we clear it: nothing is held in trust for the seller. This is the doctrine that is the problem for Deferred Sales Trusts. If that is the structure you have seen before, this is the difference.
And the ones we are not dodging: substance over form, economic substance under §7701(o), and step transaction. Separately, §453A imposes an interest charge on deferred balances above five million dollars, which is why we size notes with that threshold in view. Depreciation recapture is still taxed in the year of sale. §453 defers the capital gain, not the recapture.
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.
On a large single-year gain, the seller is pushed into the top capital-gains bracket, hit with the full 3.8% NIIT, and (in California) the 13.3% top rate. Spreading the same gain across future years under the installment method keeps far more of it in lower bands, and the tax the seller does not pay up front keeps compounding inside the fixed annuity that funds the assignment company's payments. The typical effect is an 8 to 11 point drop in the blended rate on the gain, plus the time value of the deferral.
Cost basis, depreciation/recapture, the seller's other income and filing status, and the closing timeline. We model from your numbers, not guesses.
Placement runs through a carrier-appointed structured-settlement specialist with full co-broker disclosure. Payments are owed by an assignment company and funded by a fixed annuity from a highly rated life insurer, not by us.
You see the payment schedule and the gross-profit ratio. Nothing is placed until you and the seller are comfortable. Compensation is disclosed to you in writing.
This is a one-time transaction structure. You remain the client's tax advisor. We are the specialist you brought in for this sale.
Educational only, not tax advice. Every case is modeled on the seller's actual basis, depreciation, and income and reviewed with you before placement. Hans Goldstein, Goldstein & Co. LLC, NPN 20602398. Reach us at 213-414-2808 or hans@goldsteinco.net.
