§453 · Structured Installment Sale Pros And Cons

What are the pros and cons of a structured installment sale?

The main pros: the buyer still pays in full at closing, your gain is reported as payments arrive instead of all in one year, there is no new loan to qualify for, and you pick the payment schedule before closing. The main cons: once set, the payments cannot be accelerated or cashed out, they depend on the insurer behind the annuity, there is no published IRS ruling on this specific structure, and the interest in each payment is ordinary income. It fits a seller who wants steady income and a lower tax spike, not one who needs all the cash at once.

By Hans Goldstein, IRC §453 structured installment sale specialist · Updated November 6, 2026

§453 Mechanic: How the Money Flows

Buyer cash → Assignment Co. → fixed annuity → You, on schedule

Hans Goldstein structures installment sales for sellers and works alongside their CPAs and brokers. Call 213-414-2808 or use the form below.

What are the pros?

The tax is spread out. Under IRC §453 you report gain as you receive payments. A big one-year gain that would push you into the top brackets can be spread across many years instead.
The buyer pays in full at closing. Part of the price goes to an assignment company that takes on the payment obligation and funds it with a fixed annuity. You are not the lender, and you are not waiting on the buyer to keep paying.
No new loan and no new property. Unlike a 1031 exchange, you do not have to find a replacement within 45 days, close within 180 days, or replace your old debt at today's rates. See 1031 vs structured sale when rates are high.
You design the schedule. Monthly income, a step-up schedule, a deferred start while you are still working, or a mix.
It can be partial. Take cash at closing for what you need now and structure only the portion you want as steady income. See partial structured sales.
It works for many assets. Rental property, a business, a practice, land, a collectible.
It can run alongside other tools. It can serve as the backup if a 1031 falls through, or take care of the boot in a partial exchange. See 1031 and installment sale together.

What are the cons?

The payments are locked. The contract cannot be commuted or cashed out early, because a right to take the money now would make it taxable now (constructive receipt). If your plans change, the schedule does not. This is the real trade, covered in the catch.
You rely on the insurer. The payments depend on the claims-paying ability of the assignment company and the insurer behind the annuity. Ask who they are and how they are rated before you commit.
No published IRS ruling on this specific structure. The tax treatment rests on §453 and the constructive receipt rules. Your CPA should review it, and Hans is not a CPA or attorney.
Part of the gain is still taxed in year one. Depreciation recapture is taxed in the year of sale either way, and cash you take at closing, including cash used to pay off your loan, is taxed at the sale's gross profit ratio.
The interest is ordinary income. Each payment has a principal part (gain and basis) and an interest part. The interest part is taxed as ordinary income and may be subject to net investment income tax.
Rate and inflation risk. The rate is set when the annuity is funded and does not change. See what happens if rates rise.
It must be set up before closing. It has to be written into the purchase agreement. Funds already at a qualified intermediary or already received cannot be structured later. See the timeline.
There is a cost. A commission, paid by the insurer, is built into the pricing. See fees.

Before you read further

What is the tax bill on your sale going to be?

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.

How big is the tax effect? An illustrative example

Illustrative only, federal gain mechanics, rounded: a property sells for $3,000,000 with an adjusted basis of $1,000,000, so the gain is $2,000,000 and the gross profit ratio is $2,000,000 / $3,000,000 = 66.7%. Assume no depreciation recapture and no loan, to keep the arithmetic visible.

	All cash at closing	Structure $2,400,000, take $600,000 cash
Principal received in year of sale	$3,000,000	$600,000
Gain reported in year of sale	$2,000,000	$600,000 x 66.7% = $400,000
Gain reported later, as principal arrives	$0	$2,400,000 x 66.7% = $1,600,000
Interest on the structured amount	None	Ordinary income each year it is paid

Your CPA runs your actual brackets, state tax, recapture and net investment income tax. The point of the table is the shape: the same $2,000,000 gain, reported in smaller pieces over more years.

How does it compare to the alternatives?

Option	Biggest pro	Biggest con	Fits
Pay the tax at closing	Simple, you have all the cash	Whole gain taxed in one year	Small gains, or a year with unusually low income
1031 exchange	Defers the most tax and keeps you invested	Needs a replacement property, tight clocks, and replacement debt at today's rates	Owners who want to stay in real estate
Traditional installment sale (buyer pays you over time)	Spreads the tax	You become the lender and carry the buyer's default risk	Rare buyers you trust, usually with strong security. See how it differs
Structured installment sale	Spreads the tax, buyer pays in full, no new loan	Locked payments, insurer reliance, no IRS ruling on the structure	Sellers who want steady income and are done managing property
Delaware statutory trust	Exchange into passive real estate	Lockup, and the property risk stays	Exchangers who want passive property. See lockup vs structured sale
Charitable remainder trust	Charitable deduction plus income	Gives up the principal to charity	Sellers who want to give. See CRT vs structured sale

Who is a structured installment sale a good fit for?

Sellers with a large gain who are done being a landlord or operator and want predictable income.
Sellers who do not want to take on new debt at today's rates to complete a 1031.
Sellers whose 1031 fell through or whose clock is running out. See the 1031 backup plan.
Sellers who want some cash now and steady income later, using a partial structure.

It is a poor fit if you need all the proceeds liquid, if you want to keep investing the full amount yourself, if the gain is small, or if you are uncomfortable relying on an insurer for decades.

Frequently asked

Q: What is the biggest downside of a structured installment sale? A: The payments are fixed once set. You cannot cash out or speed them up, because that would defeat the tax deferral. Many sellers solve the liquidity question by taking cash at closing for what they need and structuring only the rest.

Q: Is a structured installment sale better than a 1031 exchange? A: Neither is better for everyone. A 1031 can defer more tax and keeps you in real estate, but it needs a replacement property and often replacement debt. A structured sale needs neither and gives you income instead of a property. Some sellers combine them.

Q: Do I pay tax on a structured installment sale? A: Yes, but over time. You report gain as payments arrive, plus ordinary income on the interest. Depreciation recapture and the gain on cash taken at closing are taxed in the year of sale.

Q: Is a structured installment sale the same as a deferred sales trust? A: No. In a structured installment sale the buyer pays in full at closing and a fixed annuity funds the payments. There is no trust you manage and no investment decisions. See what it is not.

Q: Can I use it on a rental property? A: Yes. Depreciation recapture is taxed in the year of sale, and the rest of the gain can be spread. See rental property.

What should you read or run next?

Run your own numbers in the advanced calculator, or send Hans the deal and he will lay the options side by side for your CPA.

Who wrote this?

About the author

Hans Goldstein works with sellers on IRC §453 installment sales. Tax and exit-planning analysis: Hans Goldstein: Tax & Exit Planning. Annuity placement for structured installment sales: Goldstein & Co. LLC dba Goldstein Insurance Services, CA ins. lic. #4273294.

Hans is not a CPA or attorney, and this page is education, not tax or legal advice; have your CPA review your facts. A commission is paid only if a structured installment sale is funded.

Last updated November 6, 2026.

Talk to Hans: 213-414-2808

Find out what your sale is really going to cost you in tax, and what you can do about it

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.

Send me the sale price and roughly what you paid. Within one business day I’ll come back with the number you’re actually looking at and whether a structured installment sale can push it down. If it can’t, I’ll say that just as plainly.

You'll also get the plain-English Seller's Guide to §453: the math, the alternatives, and the cases where it does not work.

📞 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.

Run your specific numbers

The calculator runs your sale through real 2026 federal + state tax brackets and shows §453 savings vs lump sum side-by-side.

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