If you're a California seller considering a Structured Installment Sale or Charitable Remainder Trust, your CPA, your estate attorney, and your escrow officer each have a different set of questions they need answered before they'll sign off. Hand them this page. Every common objection, with the specific IRC section, regulation, or court case that resolves it, is in one of the three sections below. The FAQ at the bottom covers seller-side questions.
Send me the sale price and rough basis and I'll email you the actual number within one business day — plus the Seller's Guide to §453. If it doesn't fit your deal, I'll tell you that plainly.
No retainer · no obligation · the carrier compensates the broker, not you.
Statutory basis, recognition mechanics, audit history, and the §453A threshold, the answers your conservative CPA needs to sign off.
No. The two are not the same product and should not be confused.
A Structured Installment Sale (SIS) is a sale under IRC §453, the installment-sale method, with the resulting payment obligation transferred to a carrier-funded annuity via a non-qualified assignment (sometimes called a "structured sale" or "non-qualified structured settlement"). It uses the same statutory framework that has governed personal-injury structured settlements since the 1980s. Periodic payments are received from one of several major name-brand A-rated U.S. life insurance carriers, funded at closing by the carrier's affiliated assignment company.
The "Deferred Sales Trust" (DST) is a marketed product with no specific IRC code section, typically structured around an unrelated third-party trust acquiring the property in exchange for an installment note. The IRS has not blessed it via revenue ruling, multiple promoters operate under it, and the related "monetized installment sale" structure was listed in IRS Notice 2019-66 with continued enforcement scrutiny.
If a client comes to you with a "DST" proposal, we recommend they ask for the specific IRC section that authorizes the deferral. There isn't one. For SIS the answer is unambiguous: IRC §453(a)–(j), §453A, and §483 on imputed interest.
The installment method under §453 has been in the Code since 1980 (Installment Sales Revision Act). The IRS has not, in 45 years, asserted that a properly-structured installment sale with a non-qualified assignment and a carrier-funded annuity is per se invalid. The mechanics are described in Treas. Reg. §15A.453-1 and related rulings.
What the IRS HAS challenged: monetized installment sales where a third-party loan is taken against the installment note proceeds in a way that constitutes constructive receipt. The SIS structure avoids constructive receipt entirely, the seller never controls the funds, the assignment company holds the obligation, and payments come directly from the carrier on the schedule defined in the PSA.
References: §453(b)(1), Rev. Rul. 79-292, Rev. Rul. 82-122, Notice 2019-66 (clarifying the DISTINCTION from monetized structures).
Under §453(c): "In the case of any sale or other disposition during the taxable year, the income recognized for such year shall be that proportion of the payments received in that year which the gross profit (realized or to be realized when payment is completed) bears to the total contract price."
For an SIS:
Concrete: $3M premium, $400K basis, $2.6M gross profit, 87% gross profit ratio. Year-1 payment $310K. Imputed interest portion ~$80K (ordinary). Principal portion $230K. Capital gain recognized = 87% × $230K = $200K. Basis return = $30K.
§453A(c) imposes an annual interest charge on the deferred tax attributable to installment obligations exceeding $5,000,000 in the aggregate, outstanding at the end of any taxable year. The charge is computed at the federal underpayment rate (currently ~8%) applied to the deferred tax on the excess obligation.
For most California real-estate and small-business SIS deals (premium $1M–$4.5M) the threshold isn't reached. For premiums above $5M, the structuring recommendation is to take a portion as cash at closing and keep the structured installment obligation at or under $5M, eliminating §453A entirely. The calculator on this site flags this and recommends the split-tranche amount.
Note: §453A does NOT apply to installment sales of personal-use property (e.g., a primary residence), only to dispositions of business or investment property.
Recapture is recognized in the year of sale regardless of the installment method. §453(i) requires that ordinary income from depreciation recapture under §§1245, 1250 be recognized in the year of disposition, not over the installment period. Only the capital gain portion above recapture can be deferred under the installment method.
For a long-tenure investment property with significant accumulated depreciation, this can substantially reduce the deferrable portion. The calculator on this site separates recapture from deferrable gain in the inputs and computes the Year-1 cash tax liability accordingly. Sellers typically take cash at closing equal to the recapture tax obligation.
§483 requires that a portion of each installment payment be recharacterized as interest income (ordinary) when the sale price exceeds the present value of the deferred payments at the applicable federal rate. For an SIS where the annuity yield is typically 4–5% over 5–40 years, the imputed interest component is substantial and is ordinary income to the seller.
Our calculator computes per-payment imputed interest as (total payments – contract price) / total payments × annual payment, then applies federal ordinary marginal rates (2026 brackets MFJ/Single) plus California marginal rates to that portion. The principal portion is then subjected to the §453 gross-profit-ratio treatment. NIIT applies separately to investment income above the threshold.
No. §453A(d) treats a pledge of an installment obligation as a deemed payment, triggering immediate recognition of the deferred gain to the extent of the pledge proceeds. In an SIS, the seller has no installment note to pledge, the obligation has been assigned to the carrier-funded assignment company. The annuity payments themselves are non-commutable and non-assignable by the payee, eliminating the pledge issue entirely.
This is a structural protection: the seller cannot accidentally trigger immediate recognition by attempting to monetize the future payments.
Year of sale: Form 6252 (Installment Sale Income) reports the sale, the gross profit, the contract price, and the gross profit ratio. The first payment is reported on Form 6252 and flows to Schedule D.
Each subsequent year: Form 6252 continues, applying the gross profit ratio to that year's payment to compute capital gain recognized. Schedule B (interest income) for the §483 imputed interest portion. California: Form FTB 3805E (Installment Sale Income), conforming to federal §453 with minor differences on residency-change scenarios.
Under §453B, the unrecognized gain on a transferred installment obligation is generally recognized at the time of transfer. However, transfers by reason of death are specifically exempt — §453B(c). The remaining installment payments continue to the named beneficiary on the annuity contract.
Critical tax point for heirs: the unrecognized gain does NOT receive a stepped-up basis at death (this is the major estate-planning disadvantage vs holding cash to death). The beneficiary inherits the installment obligation with the decedent's basis and gross-profit ratio. Each subsequent payment recognizes the same gain ratio to the beneficiary, taxed at their individual rates. §691 (income in respect of a decedent, IRD) applies; the estate may deduct under §691(c) for any estate tax paid on the present value of the remaining payments.
Legally: the full sale price can be structured into an SIS — §453 governs the timing of gain recognition, not whether the installment contract can include nontaxable consideration. §121 excludes $250K single / $500K MFJ of gain from gross income entirely; the remaining gain is deferred under §453. In an installment sale that includes a §121 home, each scheduled payment is split three ways: return of basis (tax-free always), §121-excluded gain (tax-free under §121), and recognized gain (deferred under §453). The gross-profit ratio is computed on the recognized gain only, so the §121 exclusion isn't lost or "wasted" by structuring.
Strategically: you almost always carve out the §121-excluded amount as cash at closing instead of structuring it. The §121 portion is already tax-free in the year of sale, so spreading it over 5–40 years of annuity payments buys zero tax benefit and just kills liquidity. The standard play: take the §121-excluded gain ($250K/$500K) plus a basis-recovery cushion as cash, structure only the taxable-gain remainder.
Example (MFJ): $3M home sale, $800K basis, $2.2M gain. §121 excludes $500K. $1.7M of taxable gain is the SIS candidate. Typical structure: ~$500K–$1.3M cash carve-out at closing (which is already tax-free up to the §121 cap plus return of basis), $1.7M+ into the structured annuity to defer the bracket-stacking taxable portion. Either way, the §121 exclusion is fully captured. The advanced calculator handles this, enter sale price, basis, and the §121 exclusion treatment under the recapture/exclusion field.
Document structure, fiduciary considerations, estate-tax mechanics, and CRT drafting, the technical layer your firm needs to handle the legal piece.
You do. Hans Goldstein is a California-licensed insurance and annuity producer; he does not draft trusts or provide legal advice. CRT drafting is performed by the seller's estate planning attorney using the firm's standard CRAT or CRUT form, with the property donation timed to occur before the sale closes (a critical sequencing requirement).
Hans's role on the CRT side is: (1) model the deduction value, the income stream, the heir replacement strategy, and the overall structure economics; (2) coordinate the timing with you and the seller; (3) place the optional Guaranteed Universal Life policy that funds heir replacement; (4) coordinate with the seller's CPA on tax-year planning.
The SIS uses a non-qualified assignment mechanism. The buyer's payment obligation to the seller is assigned at closing to a single-purpose entity established by the issuing carrier:
The assignment company receives the lump-sum funding from escrow at closing, purchases the annuity from the carrier, and becomes the obligor on the periodic payment stream. The buyer is fully discharged at closing; the seller's counterparty becomes the carrier (via the assignment company).
No. This is the critical structural feature that distinguishes SIS from traditional seller carry-back financing. At closing, the buyer wires the full purchase price to escrow as in any standard transaction. Escrow disburses per the Purchase & Sale Agreement: cash directly to the seller (any cash portion), and the structured premium directly to the assignment company. The buyer signs an assignment-consent addendum but takes on no payment risk going forward.
This eliminates the "buyer cooperation" concern often raised in seller carry-back arrangements. For the buyer, the SIS adds one document at closing and a split disbursement instruction, no ongoing relationship with the seller.
No. The annuity payments are non-transferable, non-commutable, and non-assignable by the payee. This is a structural requirement of the §453 / non-qualified assignment framework and prevents the seller from later monetizing the stream (which would trigger immediate recognition of the deferred gain under §453B or §453A(d) treatment).
For sellers concerned about future liquidity needs, the structuring recommendation is to take an appropriately sized cash tranche at closing alongside the structured portion. The calculator on this site models this split.
The present value of the remaining payment stream is included in the decedent's gross estate under §2031 (general rules) and §2039 (annuity-specific). For a period-certain annuity, valuation uses the unitrust factor at the §7520 rate at date of death.
Estate tax may be due on the present value (subject to the federal exemption, $13.99M individual in 2026). California has no state estate tax. Heirs continue to receive remaining payments and recognize gain pro-rata under §691 IRD treatment (no stepped-up basis on the installment obligation, see CPA section for detail).
The interaction of estate tax with IRD creates a potential double-taxation issue that §691(c) partially mitigates via a deduction for federal estate tax attributable to the IRD. For estates approaching the exemption threshold, the structuring recommendation is to consider GUL inside an ILIT (irrevocable life insurance trust) to fund the estate tax outside the gross estate.
The CRT must satisfy the requirements of §664 to be a qualified charitable remainder trust. Key requirements:
Charitable deduction under §170(f)(2)(A) is the present value of the charitable remainder, computed using the §7520 rate published the month the trust is funded and the actuarial factors in IRS Pub 1457. For appreciated property to a 50% organization, the deduction is generally limited to 30% of AGI with a 5-year carryforward under §170(b)(1)(C).
CRT distributions to the income beneficiary follow the four-tier "Worst-In, First-Out" (WIFO) ordering under §664(b):
For a CRT funded with appreciated real estate that the trust then sells, the capital-gain tier is heavily front-loaded, distributions in the early years will carry capital-gain character. Our calculator approximates this as a blended effective rate over the projection period; the exact year-by-year character depends on trust investment selection and earnings post-sale.
For estates approaching the federal exemption threshold ($13.99M individual 2026), the GUL death benefit funding heir replacement is typically owned by an irrevocable life insurance trust to keep it outside the gross estate under §2042 rules. For estates well below the threshold, direct ownership by the insured is administratively simpler and the §2042 estate inclusion is moot.
Hans's role is to coordinate the GUL placement with the carrier (major U.S. life insurance carriers). ILIT drafting is performed by your firm. Crummey notice procedures and gift-tax annual exclusion sequencing are your firm's call.
We do not place annuities inside CRATs or CRUTs. All insurance placement on CRT cases is for wealth replacement outside the trust, typically a survivorship GUL inside an ILIT, funded by gifts from the income beneficiary’s CRT distributions.
In May 2024, the IRS issued Notice 2024-37 and proposed regulations identifying the marketed CRAT-plus-SPIA transaction as a listed transaction. In that structure, a donor funds a purported §664 CRAT with appreciated property; the trust sells the property and immediately purchases a Single-Premium Immediate Annuity; the promoter then claims the beneficiary’s annuity payments are taxed under §72 as a return-of-basis stream rather than under §664(b) tier accounting. The IRS position is that the §664(b) tier rules govern, not §72, and that the gain on the sale must be reported as it’s distributed.
Once listed, both the taxpayer and any "material advisor" (which includes the placing insurance agent) must file Form 8886 / Form 8918 disclosures; non-disclosure penalties run from $50K up to $200K, plus extended statutes of limitations and aggressive audit treatment. We will not participate in such a structure.
Where we do place a SPIA on a CRT case, it is owned personally by the income beneficiary outside the trust, typically to convert variable CRUT distributions into a predictable income stream that funds annual ILIT gifts under the gift-tax annual exclusion. The §72(u) "non-natural person" rule and the CRT’s §664 tier accounting are not implicated because the SPIA sits outside the trust.
How an SIS actually processes at close, split disbursement instructions, addendum language, lender coordination, and 1099 reporting.
At closing, the buyer's funding behaves identically to any standard real-estate or business sale transaction, buyer wires the full purchase price (or buyer's lender wires mortgage proceeds plus buyer's cash) to escrow. The only difference is the disbursement instructions: instead of wiring all net proceeds to the seller, escrow splits the disbursement into two wires:
This is mechanically identical to a split disbursement you'd handle in any transaction with multiple lien payoffs or beneficiary distributions. The only documentation difference is the assignment addendum (see next).
Three documents in addition to your standard close file:
The placing broker handles all three documents. You receive the addendum and the buyer's consent through normal closing-document workflow.
Most commercial lenders are familiar with split disbursement instructions and process them without issue. The lender wires mortgage proceeds to escrow per their standard closing instructions; escrow distributes from there per the PSA. The lender's lien is properly recorded, the loan is properly secured, and the disbursement of seller-side proceeds is outside the lender's interest.
Occasionally, a less-experienced lender's closing department asks about the unusual second wire to a non-personal recipient (the assignment company). The placing broker provides a brief explanation letter on carrier letterhead and the question is resolved in a single phone call. We have not encountered a lender that ultimately refused to fund.
Residential lenders (Fannie/Freddie conforming): the same disbursement-instruction logic applies. No CFPB or RESPA issue, the SIS does not affect the buyer's closing costs or settlement statement on their side.
The placing structured-settlement broker locks the carrier rate when the SIS addendum is included in the executed PSA. Rate lock typically holds for 30–60 days; if closing is delayed past expiration, the broker re-locks at current rates (which can move slightly in either direction).
For escrow planning purposes: you don't need to track the rate lock yourself. Confirm the structured-premium wire instructions with the placing broker 5–7 business days before scheduled close, and confirm the receiving assignment company is the same as what's in the PSA addendum.
If the transaction falls through before close, no annuity is issued and no premium changes hands. The rate lock simply expires. No party has obligations to the carrier or the assignment company. The placing broker may charge a small administrative fee for the rate-lock work (typically waived for relationship-based realtor and CPA referrals).
Escrow / title company issues the standard 1099-S for the property sale in the year of close, reporting gross proceeds (the full sale price, not the split). The seller's CPA then reports the installment treatment on the seller's federal return via Form 6252 and California return via Form FTB 3805E.
The carrier issues 1099-INT and 1099-R (or 1099-MISC depending on contract type) for the imputed-interest and structured-payment portions in each subsequent year as payments are received. These are mailed directly to the seller and the IRS; escrow has no ongoing reporting obligation.
Call the placing structured-settlement broker named on the SIS addendum to the PSA. For deals coordinated through Hans Goldstein at Goldstein & Co., the placing broker will be one of: a carrier-appointed structured-settlement specialist, a carrier-appointed structured-settlement specialist, a carrier-appointed structured-settlement specialist, or a carrier-appointed structured-settlement specialist. Their contact information will be on the addendum and Hans will introduce you directly before close. The broker provides wire instructions, the receiving assignment company's banking details, and stays on the line with you through the wire send to confirm receipt.
For pre-close coordination on a specific transaction, Hans can be reached at 213-340-2018 to introduce the right specialist.
The questions sellers ask Hans most often, direct answers without the salesy spin.
The "catches" are real and worth understanding before you sign:
The "win" is real (8–11 percentage points of permanent tax savings for the right profile). The "catch" is the illiquidity + heir-basis tradeoff. If those don't fit your situation, the calculator on this site will tell you straight that cash is the better answer.
The remaining payments continue to your named beneficiary (usually a spouse or adult children) on the same monthly schedule. They are taxable to the beneficiary as installment income at the beneficiary's individual rates, the deferred gain doesn't get a stepped-up basis at your death. If your spouse is the beneficiary and has low ordinary income, the bracket compression you set up generally continues to work in their favor.
For sellers concerned about the heir tax burden, the structuring play is to fund a small Guaranteed Universal Life policy from your SIS income stream, the death benefit pays your heirs tax-free under §101 and effectively offsets the income tax they'll owe on the remaining payments. The calculator on this site includes a GUL toggle for modeling this combination.
You can change your mind any time before closing. The SIS structure isn't binding until the PSA is signed and the closing wire is sent. Up to the moment of closing, you can decide to take all cash, or restructure the percentages.
After closing, the SIS is irrevocable. The annuity payments are non-commutable and non-assignable by you, the seller. This is a structural requirement of §453 treatment, if the payments were freely convertible to cash, the deferral wouldn't work. This is why we recommend taking a meaningful cash portion at closing if you have any near-term liquidity needs.
The carriers we use are A-rated and well-capitalized, an A-rated fixed-annuity carrier (an A-rated carrier, A+ AM Best, $400B+ in assets, in business since 1868), an indexed-annuity carrier (A-rated, backed by an institutional sponsor), an additional fixed-annuity carrier (A− AM Best). Insurance carrier failures are extremely rare, the last major life-insurance carrier failure was Executive Life in 1991 and policyholders ultimately recovered nearly 100% of their guaranteed payments through state guaranty associations.
California's Life and Health Insurance Guarantee Association (CLHIGA) backs annuity contracts up to 80% of present value, capped at $250,000 per insured. For larger premiums, the carrier's own balance sheet is the primary protection, the guaranty fund is a backstop, not the main coverage. This is one reason the calculator's optimizer recommends an A-rated fixed-annuity carrier over an indexed-annuity carrier for older sellers and larger deals, the A+ rating and brand history matter most when stakes are highest.
Both. The installment-sale method under §453 applies to any sale of property where the seller receives at least one payment after the close of the year of sale. Business sales (service businesses, professional practices, contractors, manufacturers) work particularly well for SIS because goodwill, typically the largest asset in a service business, has zero basis and generates pure capital gain (no depreciation recapture to handle).
The calculator on this site handles both real-estate and business sales, enter $0 for the depreciation recapture field if the sale is a goodwill-heavy business with no §1245/1250 property.
For SIS: the addendum is added to your PSA before mutual acceptance, typically a 30-minute conversation between Hans, your real-estate or business attorney, and the placing structured-settlement broker. Rate lock happens within a week. Closing then proceeds on your standard timeline (30–45 days for real estate, 60–120 days for business sales). No extra delay beyond what you'd already plan for.
For CRT: trust drafting by your estate attorney typically runs 2–4 weeks. The property must be donated to the trust BEFORE the sale closes, the trust then sells the property. This requires coordination between your attorney, your real-estate agent, and the receiving charity. Plan for an additional 30–60 days vs a straight cash sale.
No direct fees to Hans. On a placed SIS, compensation flows from the carrier (an A-rated fixed-annuity carrier, an indexed-annuity carrier, etc.) to the carrier-appointed structured-settlement broker, who then pays Hans a co-broker referral split. The full compensation arrangement is disclosed in writing to you before any placement, per California SB 263 best-interest standard.
The carriers' commission is paid by them as the cost of distributing their product, not deducted from your structured premium. Your full sale price is structured (or whatever portion you choose); your payments are calculated on that full amount.
For CRT: your estate planning attorney charges their normal trust-drafting fee ($3K–$15K typical), paid by you directly to the attorney. The trustee (often a community foundation or corporate trustee) charges ongoing trustee fees (typically 0.5%–1.5% annually of trust assets). Hans coordinates but is not paid for the CRT itself; if a Guaranteed Universal Life policy is placed for heir replacement, Hans is compensated on the life insurance through standard producer commission.
No. The SIS and CRT are coordinated alongside your existing CPA and estate attorney, they don't replace them. Your CPA continues to handle your annual tax return (Form 6252 for SIS, Form 5227 for CRT). Your estate attorney continues to handle your estate plan; the CRT or GUL becomes one component of it.
Hans's role is the modeling and the placement coordination, he's the specialist who knows the carrier landscape, the structure mechanics, and the §453 / §664 rules in operating detail. Your CPA and attorney bring the relationship, the tax-return work, and the legal drafting. The three roles complement each other.
Ask them three specific questions:
If after the conversation your CPA still recommends against, take their advice, they know your full picture. But ensure they're saying no to the actual SIS, not to something else they've conflated with it.
Call 213-340-2018 or email [email protected]. First call is 20 minutes, no pitch deck, bring your rough sale price, basis estimate, and approximate post-sale income, and Hans will walk through the calculator with you and tell you straight whether SIS or CRT actually fits your situation.
A plain-English guide for sellers: how a structured installment sale defers the tax when you sell a business, practice, or property — the math, the alternatives, and how to know if your deal fits.
Drop your info — instant PDF download + within 1 business day Hans will email a preliminary read on which structure fits your deal. No retainer. Carrier compensates the broker — not you.
📞 Hans Goldstein · 213-340-2018 · CA Insurance License #4322192 · Independent §453 specialist · Goldstein & Co. LLC
