Selling Your Marina Without Giving 38% to the IRS

Here's the part nobody at the closing table warns you about: a lump-sum sale can hand back 34-40% of your proceeds to the IRS in the year you close.

Long-term capital gain on the land and appreciation. Plus §1250 unrecaptured depreciation on your piers, seawalls, and buildings. It stacks fast.

There's a legal way to spread that tax bill over years instead of paying it all at once. It's IRC §453, a structured installment sale. Here is how it works.

What you CAN defer vs what you CAN'T

Be honest with yourself up front. Not every dollar of a marina sale can be spread. The tax code splits your assets in two:

CAN defer (spread over years under §453):

• Land
• Submerged-land / tidelands leasehold
• Fixed piers and seawalls (§1250)
• Goodwill

CAN'T defer (taxed in year one as ordinary recapture, §1245):

• Floating docks
• Fuel systems
• Travel-lift
• Forklifts
• Dry-stack racking

The move: allocate as much of the purchase price as you legitimately can away from the §1245 equipment and toward land, structures, and goodwill. Every dollar you shift is a dollar you get to spread instead of a dollar taxed now at ordinary rates. This purchase-price allocation fight is worth having, so bring it up before you sign.

The math: $9M marina sale, 20-year hold

Assumptions: $9M sale, $1.5M basis after accumulated depreciation. §1250 spreads under §453; §1245 equipment recapture excluded from the deferred portion.

Seller financing without the risk

You've probably been told you can spread the tax by financing the buyer yourself: carry a note, take payments over years, pay tax as the money comes in. True. But look at what you're actually signing up for:

You become the bank. You finance a Fortune 500 buyer, and you eat the default risk. If they stumble, miss payments, or the deal sours, that's your problem now.

§453 flips it. An assignment company takes over the note and pays you on a fixed schedule, funded by a fixed annuity from a highly rated life insurer. You get the exact tax-spreading of seller financing, with zero buyer risk.

The buyer pays cash and walks. You get fixed, scheduled payments from the assignment company, funded by a highly rated life insurer's annuity. Tax spread, buyer risk gone. That's the whole point.

Marina-specific tax wrinkles

1. §1245 vs §1250 allocation. This decides the deal. Floating docks, fuel systems, travel-lift, forklifts, dry-stack racking = §1245 (recapture in year one, NOT deferrable). Land, fixed piers, seawalls, buildings = §1250. Allocate carefully (see the callout above).
2. Submerged-land / tidelands lease assignment. Your slips may sit on a state tidelands or submerged-land lease. Assigning that lease to the buyer is its own approval process and can shift how value is allocated. Handle it before structuring.
3. Wet-slip vs dry-stack valuation. These price very differently per unit. Get the valuation split right before you structure, because it drives your §1245/§1250 lines.
4. Fuel-dock environmental holdback. Buyers often hold back cash for fuel-system and environmental exposure. Structure that holdback into the note so a delayed payment doesn't blow up your tax timing.
5. Ships-store / restaurant components. Retail, fuel resale, and restaurant income are often valued separately, and the inventory and equipment there may be ordinary income. Carve them out cleanly.

When this fits

• $1.5M+ sale (carrier minimums)
• 10+ year hold (meaningful recapture exposure)
• Exiting the marina entirely (no §1031)
• Aggregator buyer (Suntex, Safe Harbor, Westrec, Oasis; all doable under §453)

When it doesn't

• 1031 into another marina or waterfront property (different strategy)
• Sale under $1.5M
• Deal that's almost entirely §1245 equipment with little land or structure value

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 marina size, slip count, location, basis, prior depreciation, and the offer.

Frequently asked

Q: My marina is mostly floating docks and a fuel system. Can I still defer? A: Partly. Floating docks, fuel systems, and lifts are §1245, so that recapture hits in year one. But your land, fixed piers, seawalls, and goodwill can spread under §453. The bigger those pieces, the more you defer, which is why the price allocation matters so much.

Q: My slips sit on a state tidelands lease. Does that break §453? A: No. The submerged-land or tidelands leasehold can itself be a deferrable asset. The lease assignment is its own approval track with the state, so start it early, but it doesn't stop you from structuring the sale.

Q: The buyer wants an environmental holdback on the fuel dock. How does that work with §453? A: You structure the holdback into the installment note so a delayed or contingent payment lands in the right tax year. Done right, the holdback doesn't wreck your spreading. It becomes one more scheduled payment.

Educational. Not tax or legal advice.