Selling Your Concrete Business Without Giving 38% to the IRS

Good. You built something they can't easily replicate: permitted reserves in the ground.

A lump-sum cash close hands 34-40% of your proceeds to the IRS the year you sell. Two taxes stack: capital gain on the reserve land and plant real property, plus depreciation recapture on the batch plant, crushers, and mixer fleet.

IRC §453 spreads that gain across years instead of eating it all at once. Less tax. More compounding. On your timeline.

What you CAN defer vs what you CAN'T

CAN defer (spread over years):

• The land + plant buildings, scale house, and site improvements (§1250 real property)
• The aggregate reserves: land with sand, gravel, and rock in the ground. This is your crown jewel and it's capital gain.
• Goodwill and customer base: the contractor relationships and supply agreements

CAN'T defer (taxed in year one, and I won't pretend otherwise):

• The rolling stock and iron: mixer truck fleet, batch-plant equipment, crushers and screens, wheel loaders, conveyors, scales. That's §1245 personal property. Ordinary-income recapture, due in full the year you close.

The move: allocate the purchase price so as little as possible lands on §1245 and as much as defensibly possible lands on the reserves and real property. That line item is the difference between a clean deferral and a surprise tax bill.

The math: $6M concrete/aggregate sale, 25-year hold

Assumptions: $6M sale, ~$1M basis after decades of depreciation and a tiny original cost on the reserve land. §1250 and reserve gain spread under §453. Figures are illustrative; your allocation drives the real number.

Seller financing without the risk

A normal installment sale means you finance the buyer. They stop paying, your money's gone. Real risk on a business you no longer control.

§453 flips it.

An assignment company takes over the payment obligation at closing and funds it with a fixed annuity from a highly rated life insurer. Not the buyer.

• You get the tax-spreading of seller financing.
• You carry zero buyer default risk.
• Buyer's roll-up hits a rough cement cycle? Doesn't touch you. Your money already left the buyer's hands at closing.

Tax-smart payments from an assignment company funded by a fixed annuity from a highly rated life insurer, instead of the acquirer who just bought your pit. Your payments depend on the assignment company and the insurer behind its annuity.

Concrete- and aggregate-specific wrinkles

1. The reserves are the whole game. Land with proven sand, gravel, or crushed-stone reserves is what Vulcan and Martin Marietta are actually buying. That gain is capital gain and it's exactly what §453 spreads. Get the reserve valuation and allocation right before anything else; it's usually the fattest slice.
2. Percentage-depletion recapture. If you've claimed percentage depletion on the pit over the years, part of the reserve gain can face recapture and ordinary-income treatment that runs ahead of the capital-gain layer. Model the depletion history first. It changes how much of the reserve sale actually defers cleanly.
3. Batch plant + mixer fleet are §1245-heavy. Central-mix or dry-batch plants, crushers, screens, wheel loaders, conveyors, and the ready-mix truck fleet are all §1245 personal property. Ordinary income, year one, not deferrable. In a mature operation that's a big chunk of stated book value, so allocate away from it where the appraisal supports it.
4. Permits are worth more than the iron. Air permits, mining/reclamation permits, and environmental approvals are brutally hard to get on a new site. That scarcity is why an existing permitted operation commands a premium. That intangible permit value lands in goodwill and reserve value, both structurable under §453. Don't let it get miscategorized.
5. Reclamation bond obligation follows the site. Your surety/reclamation bond and the future reclamation liability are part of the deal economics. State mining regulators require the bond to guarantee the pit gets restored, and that obligation has to transfer or be re-posted at closing. How the buyer assumes it affects net proceeds and the allocation, so flag it early so it doesn't surprise the structure at closing.
6. Haul-distance moat sets the multiple. Ready-mix has a roughly 90-minute delivery radius before the load starts to set, and aggregate is freight-sensitive: every mile the buyer has to truck rock eats margin. So a well-located pit with no nearby competitor is a local monopoly, and the acquirers know it. That moat prices into goodwill and reserve value, which are capital-gain buckets, not §1245. When a strategic buyer pays a premium to lock up your market, make sure the allocation reflects that it bought a franchise, not a fleet of trucks.
7. Decades-old family business, tiny basis, huge gain. Many of these are second- or third-generation operations. The reserve land was bought for a song 40 years ago and the buildings are long depreciated, so basis is almost nothing and nearly the entire sale is gain. A lump-sum close can push a lifetime of built-up gain into a single tax year at the top bracket. That's exactly the profile where spreading the gain under §453, and staying out of the highest year-one bracket, saves the most.

When this fits

• $1.5M+ sale (carrier minimums)
• 10+ year hold (real recapture and reserve gain exposure)
• Cashing out of the operation entirely (no §1031)
• Strategic or PE buyer (Vulcan, Martin Marietta, CRH, Cemex, Knife River, US Concrete have all done installment deals)

When it doesn't

• 1031 into another pit or industrial site
• Sale under $1.5M
• Pure equipment liquidation with little reserve or real-property gain

How I work

Hans Goldstein, EA, IRC §453 specialist. Admitted to practice before the IRS. Placements with highly rated life insurers (A or better by A.M. Best or equivalent) in all 50 states. Free 15-minute fit-check call. Bring reserve tonnage estimates, land basis, depletion history, prior depreciation, equipment schedule, permit list, and offer.

Frequently asked

Q: My reserve land was bought decades ago for almost nothing. Can §453 defer the gain on it? A: Yes. The gain on land with sand, gravel, or rock reserves is capital gain, and that's exactly what §453 spreads across years. Tiny basis means nearly the whole sale is gain, which is the profile where deferral saves the most. The one thing to model first is your percentage-depletion history, which can pull part of the gain into ordinary-income recapture ahead of the capital-gain layer.

Q: A lot of my book value is in the batch plant, crushers, and mixer trucks. Can I defer that? A: No. The plant, crushers, screens, loaders, conveyors, scales, and truck fleet are §1245 personal property, recaptured as ordinary income in the year of sale and not deferrable. §453 defers the §1250 real property, the reserve land gain, and goodwill. That's why the allocation between iron and reserves is everything.

Q: The buyer is really paying up for my permits. Where does that value land? A: Air, mining, and reclamation permits are almost impossible to get on a new site, so that scarcity shows up as goodwill and reserve value. Both are capital-gain buckets that structure under §453. The mistake is letting permit value get lumped with equipment. Allocate it deliberately.

Q: I still owe a reclamation bond obligation on the pit. Does that block the structure? A: No, but it affects the economics. How the buyer assumes the reclamation liability and surety bond changes your net proceeds and the allocation. I flag it early so it's built into the numbers instead of surprising us at closing.

Q: I own the reserve land and the operating company in separate entities. Do I need two structures? A: Effectively yes. Selling both triggers two taxable events, real property/reserves and going-concern. Each can be structured under §453, but each needs its own allocation and paperwork. I handle both together.

Educational. Not tax or legal advice.