Internal Revenue Code §453 has been on the books since 1926. The complete history of installment sale tax treatment, structured settlements, and the modern assignment-company SIS structure California sellers use today. The installment method is old; the assignment structure an SIS uses is much newer, and no IRS ruling specifically approves it, so have your own CPA or tax attorney review it.
By Hans Goldstein, EA, Tax & Exit Planning · Updated
Admitted to practice before the IRS.
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.
In the early 1900s, American farmers faced a real problem: when they sold a tract of land for $50,000 but only collected $5,000 a year over 10 years, the IRS forced them to pay tax on the FULL $50K in Year 1, long before they had the cash to pay it. The Revenue Act of 1926 fixed this by formally codifying the installment-sale method: tax is owed pro-rata, in the year each payment is actually received.
That core principle has been in the tax code ever since, and the current §453 is the Installment Sales Revision Act of 1980 rewrite.
Congress added Internal Revenue Code §664, the Charitable Remainder Trust. It codified the rules for trusts that sell appreciated assets tax-free and pay income to a non-charitable beneficiary, with the remainder going to charity. The CRT and the §453 installment sale are the two foundational structures California sellers still use for capital-gains tax planning.
In response to large personal-injury awards, highly rated life insurers built the "structured settlement" industry. A third-party assignment company would take over the obligation to pay the injured party in installments, funded by an annuity from the carrier. This let plaintiffs collect tax-free §104(a)(2) damages over time instead of in one lump.
The same assignment infrastructure, with an assignment company as third-party obligor funded by an annuity it owns, became the foundation for the modern Structured Installment Sale.
For taxable sales, the modern SIS is built on IRC §453(f)(3), which says a buyer's note is not a "payment" even when someone else guarantees it, and on Treas. Reg. §15a.453-1(b)(3)(i), which treats a note secured by cash or a cash equivalent as payment. No IRS ruling specifically approves the assignment step, so have your own CPA or tax attorney review the documents.
What the IRS has not done is issue a ruling approving the structured installment sale as a product. The position is that an SIS is an ordinary §453 installment sale, standing on the same statute, regulations, and constructive-receipt rules as every other one. That is why the setup details matter: no right to the cash at closing, no note secured by cash or a cash equivalent (Treas. Reg. §15a.453-1(b)(3)(i)), and no loan against the payments. Because it is a position and not a ruling, have your own CPA or tax attorney review the documents.
As California capital-gains tax rates climbed (state top rate to 13.3% in 2012, plus the 1% Mental Health Services Tax above $1M from Prop 63 in 2004), high-net-worth California sellers began using SIS structures to spread the bite. Highly rated life insurers built out fixed annuity products for commercial sales to meet demand.
Three reasons:
So a structure built on the long-standing §453 installment method rarely comes up in an ordinary California real-estate sale. The problem isn't the tax rule. The existing advisory team rarely has the appointments to place it, or a reason to raise it.
The SIS calculator runs your sale through real 2026 federal + California tax brackets and estimates the savings from §453 installment treatment.
Run the calculator → 213-414-2808
A plain-English guide for sellers on how a structured installment sale defers the tax when you sell a business, practice, or property. It covers the math, the alternatives, and how to tell if your deal fits.
Leave your details and the PDF downloads right away. Within one business day Hans will email a preliminary read on which structure fits your deal. No retainer. On a funded structure, the insurer pays a one-time commission of about 4% of the amount structured to the brokerage firm that places it (Hans’s share is about 2.4%; no trail). It is built into the annuity pricing, not a separate fee.
📞 Hans Goldstein · 213-414-2808 · CA Insurance License #4273294 · Independent §453 specialist · Goldstein & Co. LLC
Hans Goldstein, a licensed insurance agent (CA Insurance License #4273294), will contact you and may discuss insurance products, including annuities.
To match the tax to the cash. A seller who is paid over years should not owe tax on the full gain in the year of sale. Under §453, each payment is split into return of basis, gain and interest, and only the gain and interest in that payment are taxed that year. That keeps more of the gain in lower brackets and lets the deferred tax keep earning for the seller.
At least one payment must come after the tax year of the sale. Dealer sales, inventory, publicly traded stock and securities, and depreciation recapture under §453(i) do not qualify for deferral. The note must carry adequate interest. Pledging the note counts as a payment under §453A(d), disposing of it triggers the deferred gain under §453B, and related-party resales within two years can accelerate it under §453(e).
Yes, in combination. You can exchange part of a property and take a note for the rest, and the boot portion can be reported on the installment method. Under Treas. Reg. §1.1031(k)-1(j)(2), a qualified intermediary can also take a note from the buyer, so a failed or partial exchange can still be spread. A structured installment sale is often used to absorb the boot so the deal still closes.
File Form 6252 for the year of sale and every year you receive a payment. It computes the gross profit percentage, the taxable gain in each year's payments and any recapture due in year one. The gain then flows to Schedule D or Form 4797, and the interest is reported separately as ordinary income.
Sources: 26 U.S.C. §453 (Cornell LII); IRS Publication 537, Installment Sales; IRS: About Form 6252, Installment Sale Income. Checked October 3, 2026.
