The §453 Feasibility Analysis

This is the opposite of that: a flat-fee written analysis, delivered before you sign, that tells you what the sale actually costs and whether deferring beats paying now.

It is built to be handed to your CPA. Every figure shows its arithmetic and every assumption is listed, so they can check the work, disagree with a specific input, and sign off — or not. Your CPA keeps the relationship and the return. I do one calculation they rarely have time to build from scratch, on one section of the code I work in every day.

What it answers

1. What the sale really costs. Not "20% capital gains." The number that matters is built from four layers that stack, and most sellers only know about the first:

• Long-term capital gain at your bracket
• Unrecaptured §1250 gain at a flat 25% — this is the layer that decides the rate on most real estate. On a $4M building held 25 years, this alone can be $769,000 of the gain
• §1245 and goodwill recapture, taxed as ordinary income in the year of sale — and under §453(i) it is recognized in full at closing even in an installment sale. This is the ambush that wrecks otherwise-good structures
• 3.8% net investment income tax, plus your state

2. Whether an installment structure actually helps you. Sometimes it does not. A seller with $250,000 of other income saves far less than a retired seller whose income collapses when the rent leaves with the building. The analysis models your real post-sale income, not a generic one.

3. What term. This is where the money is. The $250,000 threshold is a double cliff — the NIIT threshold and the senior deduction phase-out end at the same number. A 10-year term can put you over it while a 20-year term keeps you under, and the difference on a single deal runs into six figures. Slower is usually better, up to a point. The analysis finds that point.

4. Whether §453A eats the benefit. Once your outstanding installment obligations exceed $5,000,000 at year end, the IRS charges interest on the deferred tax. Above that line the arithmetic changes and sometimes the answer is to split the sale, structure part of it, or not structure at all. Any analysis that ignores §453A on a large deal is not a real analysis.

5. How it compares to the alternatives. Side by side, same assumptions, no thumb on the scale:

A 1031 is often the right answer — and if it is, the analysis will say so. The honest distinction is that a 1031 keeps you in the business you are trying to leave. For a seller who actually wants out, that is not deferral, it is a sentence.

What you receive

A written memo, typically 8–14 pages:

• Your gain, decomposed into all four tax layers with the arithmetic shown
• Adjusted basis reconstruction, including the depreciation you have already taken
• Tax due at closing under each option, and total tax over the life of each
• Recommended term, with the year-by-year income projection behind it
• The §453A test, applied to your numbers
• Imputed interest / AFR exposure if the deal is seller-financed
• Timing constraints — what has to happen before escrow closes, and the date it becomes impossible
• Assumptions and sources, so your CPA can disagree with any of them specifically

Fee

$2,500 — single asset, one entity. $5,000 — multiple assets or entities, or coordination directly with your CPA and attorney.

The fee is flat, paid up front, and not credited against anything. That is deliberate. An analysis that gets refunded when you buy a product is not an analysis, it is a sales cost. This one is priced to stand on its own, and it is designed to be worth the money even when the recommendation is "sell outright and pay the tax."

The timing problem, stated plainly

An installment sale has to be structured before the sale closes. Once escrow funds and you have constructive receipt of the proceeds, §453 is unavailable — not difficult, unavailable. There is no retroactive fix, no amended-return path, nothing a good CPA can do in March.

The practical deadline is before you sign the purchase agreement, because the agreement itself has to accommodate the structure. If you are already in escrow, the analysis is still worth running, but the window is measured in days.

Who this is for

Sellers with a gain above roughly $500,000 — below that the tax saved rarely justifies the fee or the structure. Real estate, closely held businesses, professional practices, land, and appreciated assets that do not qualify for a 1031.

It is also for CPAs and attorneys who have a client with a large gain and want the installment modeling done properly without building it themselves. I do not prepare returns, I do not represent taxpayers before the IRS, and I do not take over client relationships. The analysis comes back to you.

What this is not

This is a modeling analysis of a proposed transaction, prepared by a licensed life and annuity agent who specializes in §453 structured installment sales — not by a CPA, enrolled agent, or attorney.

That means specific things. I do not prepare tax returns. I do not represent taxpayers before the IRS. This analysis is not a tax opinion within the meaning of Circular 230, and it is not legal advice, a valuation, or an audit. It is arithmetic and statutory analysis of a transaction you have not yet done, written so that your own CPA or attorney can review it and make the call. You should have them do exactly that before you act on it.

If an installment structure turns out to be the right answer and you choose to implement one, the funding is a separate engagement with separate compensation, disclosed to you in writing at that time.