A Structured Installment Sale (SIS) is an IRS-codified §453 installment-sale structure where an A-rated insurance carrier assumes the obligation to pay the seller over time, spreading capital-gains recognition across years.
When most people hear “installment sale,” they think of the old-school version where the buyer pays the seller directly over time — like seller-financed real estate. That arrangement carries massive buyer-default risk for the seller and is NOT what the SIS does.
Bottom line: the SIS keeps the §453 spread-tax benefit of the old installment sale but eliminates the buyer-default risk. The buyer wires the full sale price to escrow on closing day — same as any cash sale. Escrow splits the wire per the SIS rider: any cash carve-out goes to you, the rest goes to the assignment company which immediately purchases an annuity from an A-rated carrier. The carrier becomes the obligor.
A Structured Installment Sale (SIS) is an IRS-codified §453 installment-sale structure where an A-rated insurance carrier — through a third-party assignment company — assumes the buyer’s obligation to pay the seller over time, spreading the capital-gain recognition across multiple tax years instead of stacking the entire gain in Year 1.
The seller is paid via a guaranteed annuity from the carrier (typically over 5-40 years). The buyer pays cash at closing as in any normal sale. Escrow closes on the normal timeline. The only difference is one extra document at closing — the assignment agreement.
In a traditional seller-financed installment sale, the BUYER owes the seller the deferred payments — which creates risk: if the buyer defaults, the seller loses the income stream. The SIS solves this by inserting a third-party A-rated insurance carrier as the obligor:
Result: the seller’s income stream is guaranteed by an A-rated insurance carrier (not by buyer creditworthiness), the §453 installment treatment is preserved, and the buyer walks away with no ongoing obligation.
The SIS is not a separate transaction tacked on later. It is the structure inside which the sale itself happens. Here is the entire timeline from listing to first carrier payment:
Hans + escrow officer draft the SIS assignment addendum.
Buyer signs the PA with the SIS as a condition of the sale.
Normal escrow timeline. Title records to buyer at close.
Assignment company receives the wired funds, immediately purchases an annuity from a name-brand A+ AM Best-rated carrier (or A- KBRA indexed carrier for deferred-start). The carrier becomes the obligor on the future periodic payments.
Carrier pays the seller monthly or annually for the full term.
Why this matters: the moment escrow opens with the seller as the obligee on a normal lump-sum sale contract, the seller is in constructive receipt of the full sale price for IRS purposes. Inserting an SIS assignment after that point doesn’t qualify for §453 treatment — the IRS treats the proceeds as already received.
The fix: the SIS assignment must be drafted into the original Purchase Agreement as a condition of the sale. The buyer signs the standard PA plus a one-page SIS assignment rider. From the buyer’s side: no different cash, no different timing, no different funding mechanics — just one extra signature acknowledging the wire splits at closing.
This is the conversation that kills more SIS deals than anything else: the seller mentions "structured installment sale" to the buyer late in the process, the buyer panics about "what is this weird thing", and the deal falls apart over a misunderstanding. Here is what the buyer is actually being asked to do:
What the buyer is not doing:
When framed correctly in the original contract, the SIS assignment is invisible to the buyer’s experience. The buyer sees the same wire, the same recording, the same title transfer they would in any sale. The structure happens entirely between the assignment company, the carrier, and the seller — after the buyer’s wire lands.
If your property is already in escrow on a standard lump-sum contract, it is too late for the SIS on this sale. Call before you list. Or before you sign the Purchase Agreement. Never after escrow opens.
The structural advantage on a typical California sale of appreciated property:
Same $2M sale. Same total dollars to the IRS (close to it). Wildly different shape on your year.
This is what bracket compression can look like in practice. The roughly 12-point effective-rate reduction on $2M of gain shows up as the difference between facing a ~$740K bill in March and a ~$25K bill once a year for 20 years. Actual outcomes depend on your bracket, deal terms, and tax law at recognition.
Two categories of A-rated carriers issue SIS annuities:
The specific carrier is selected based on the seller’s term, start date, and yield preferences at the time of structuring.
The tax-deferral story is the headline. These three are the ones sharp CPAs and estate attorneys mention only when you specifically ask.
Annuity payments enjoy partial-to-full creditor protection in most states. California exempts annuity payments up to ~$10,000/month under CCP §704.100, and federal BAPCPA provides bankruptcy-side protection.
A $2M lump in a brokerage account is fully attachable in a judgment. The same $2M structured as SIS payments is largely judgment-resistant. Big for doctors, business owners, anyone with professional-liability exposure.
Cash sale → after-tax proceeds typically land in a managed brokerage at ~1% AUM. On $2M, that's $20K/year in fees, or roughly $500K over 25 years.
SIS pays you on a contract schedule from a carrier. No AUM fees, no investment-selection decisions, no rebalancing, no fund expense ratios layered on. The fee math is genuinely zero ongoing once the contract is issued.
SIS payments are not "earned income" for the Social Security earnings test. A 62–69-year-old can collect SIS while delaying SS to age 70 for the 8%/year delayed-retirement credit.
Over a 30-year retirement, delaying SS from 62 to 70 increases lifetime benefits by ~$300K–$500K for the typical California seller profile. SIS provides the bridge income that makes the delay possible.
The most-asked question after “is the SIS guaranteed?” is this: “What happens if I die before the SIS term ends?”
The straight answer: the remaining payments go to your named beneficiaries (typically heirs or a trust), and each payment continues to be taxable to them as “Income in Respect of a Decedent” (IRD) under IRC §691. Unlike property held until death, the remaining SIS payments do NOT get a §1014 stepped-up basis. Heirs pay income tax on every payment they receive.
This is the one place where the SIS structurally loses to holding an appreciated asset until death. If you hold a $2M rental property until death, your heirs inherit at $2M stepped-up basis and can sell for $0 tax. If you have a 30-year SIS paying out $80K/yr and you die in year 5, your heirs receive 25 more years of payments — each one taxable to them.
For sellers who care about the heir-inheritance outcome, the standard solution is to layer a GUL (Guaranteed Universal Life) policy on top of the SIS. GUL is a permanent life insurance contract with a contractually guaranteed death benefit to age 121 — not dependent on investment returns, no cash-value gambling.
| Product | Best use | Why NOT for SIS heir replacement |
|---|---|---|
| Term insurance | Income replacement during working years | Expires at 80-85. Useless for late-life heir protection. |
| Whole life | Estate planning with cash accumulation | 3-4× more expensive than GUL for same death benefit (you pay for cash value you don’t need here). |
| Indexed UL | Performance-linked accumulation | Death benefit can lapse if returns disappoint. Not contractually guaranteed. |
| GUL (Guaranteed Universal Life) | Contractually-guaranteed death benefit to age 121 | THIS is the right tool. Cheapest way to lock in a specific death benefit amount. |
Underwriting standard: healthy 60-70-year-old gets “preferred” class GUL rates. Health conditions push toward “standard” or “substandard” rates — still issuable in most cases but at higher premium. The calculator’s GUL toggle estimates a preferred-class premium; actual carrier quote requires full medical underwriting.
This is the structural insight most sellers miss: the SIS works because the full pre-tax sale price compounds inside the carrier contract — not the after-tax leftover.
On a $2M California sale with ~37% blended tax:
Advantage: ~$630K, at the same yield. The SIS doesn’t need to outperform the cash side’s yield. It just compounds more starting principal. Bigger principal × same yield = more income, every year, for the entire term. This is mathematically impossible to replicate with any after-tax investment vehicle.
The advantage scales with: (a) the gain percentage (higher gain = bigger tax savings = bigger principal advantage), (b) the term length (more years of compounding amplify the gap), and (c) your marginal tax rate (higher bracket = bigger Year-1 tax = bigger after-tax shrinkage on the cash side).
The installment-sale method was codified in the Revenue Act of 1926 to solve a real problem for farmers: they were being taxed on income they hadn’t yet received. Over the next 100 years the rules were refined — the 1980s structured-settlement industry built the carrier-assignment infrastructure, and IRS Revenue Procedure 2005-26 formally blessed the use of that infrastructure for taxable §453 sales. Full 100-year history →
The calculator on this site runs your sale through real 2026 federal + CA tax brackets and shows the exact savings from §453 installment treatment vs a straight cash sale and vs a CRT.
Run the calculator → 213-414-2808
