Mainstream CPAs, tax attorneys, A-rated insurance carriers, the IRS itself, and household-name financial-planning publications have all published on IRC §453 Structured Installment Sales. Below — direct quotes, citations, and a downloadable carrier white paper. Verify everything.
When a Fortune 500 life carrier puts its three top in-house tax-and-ERISA attorneys on the byline of a white paper explaining a structure to their distribution channel, it's because the structure is real, it's compliant, and they want to write the annuity premium. Read the paper. Bring it to your CPA.
By Matin Momen, VP & Associate General Counsel (Product Tax & ERISA), Maureen Darrow, Assistant General Counsel (Product Tax & ERISA), and Bejan Shirvani, AVP Structured Settlements — MetLife. 7 pages. Covers IRC §453 mechanics, the seven required closing documents, a full $1.1M worked example with the math ($151K cash-sale tax → $22K Year-1 + $16K/yr for 6 years on the structured side), and the 5-step assignment-company funding flow.
Structured installment sales add an insurance company to the installment sale. The insurance companies providing such payments are highly regulated and have strict reserve requirements designed to prevent insolvency. They also typically have strong financial strength ratings from leading credit ratings agencies, which demonstrates their ability to meet future financial obligations.
If Bill had received the sale proceeds in a lump sum ($1,130,000), he would have to pay over $151,400 in capital gains taxes assuming a marginal capital gains tax rate of 20% plus over $27,200 in NIIT. But, by utilizing a structured installment sale, he will pay about $22,365 of capital gains taxes this year on the $202,500 payment and about $16,380 in each of the following 6 years on the $150,000 annual payment.
When the right set of circumstances presents itself, there may be no simpler way to defer, reduce, or completely eliminate long-term capital gains taxes than a structured installment sale … Investors and business owners would be well advised to explore the option.
Structured installment sales evolved as an outgrowth of IRC section 453, which governs the selling of qualifying appreciated assets using the installment method.
The gain is taxed as it's realized over time, rather than all at once, which can significantly affect your total tax bill.
Kitces.com is the most-cited continuing-education resource for CFPs, RIAs, and fiduciary advisors in the country. Their position: the §453 Structured Installment Sale uses a regulated insurance carrier as the obligor — that's why it works. The "Deferred Sales Trust" version shifts the credit risk onto a private trustee with no carrier behind it — that's why the IRS scrutinizes it.
Under IRC Sec. 453, capital gains on the sale of assets, such as privately held businesses where the payments are spread out over a period of 2 or more years, are deferred until the years when the payments are actually received.
For owners of businesses and other assets, a Structured Installment Sale works similarly to a DST in that it uses a third party to facilitate the installment agreement between the buyer and the seller, except that the third party uses the sales proceeds to fund an annuity.
Maintains an extensive archive of carrier white papers (MetLife, USAA, etc.) and IRS rulings on §453, distributed to attorneys and CPAs nationally. The structured-settlement industry has been issuing IRS-blessed installment annuity contracts since the 1982 Periodic Payment Settlement Act — SIS is the same product mechanically, just applied to a real-estate or business sale instead of a personal-injury settlement.
View archive →Publishes detailed how-to-close-escrow guides for attorneys and CPAs on the §453 structured sale: how the addendum is incorporated into the Purchase & Sale agreement, how the buyer's payment obligation gets assigned to the assignment company at closing, and how the funding goes directly to the life-insurance carrier issuing the annuity.
Read on seracapital.com →Walks through the practical closing-side mechanics: how SIS integrates into the normal escrow timeline, who signs which document, and what the assignment company actually does. Useful reference for escrow officers and listing agents seeing this for the first time.
Read on jcrsettlements.com →Mirrors MetLife's SIS white paper and publishes ongoing commentary on §453 placements for the structured-settlement industry. Holds CPCU, MSSC (Master's-level Settlement Consultant), and RICP (Retirement Income Certified Professional) designations.
Read the mirrored MetLife white paper →Multi-article series on §453 Structured Installment Sales for California sellers, including a direct head-to-head comparison with Deferred Sales Trusts and a California-specific analysis of how the SIS interacts with the 13.3% state top bracket plus the 1% Mental Health Services Tax over $1M. Burns argues the SIS is the IRS-blessed, audit-defensible alternative to the DST.
Read on jamesburnslaw.com →Detailed legal walkthrough of how §453 installment treatment works, the §453A interest-charge threshold ($5M of outstanding installment obligations), and the IRS revenue procedures that bless the structure (including Rev. Proc. 2005-26).
Read on 453trust.com →Institutional analysis positioning §453 installment sales as the right tool when 1031 isn't available — for example, on a business sale, on a primary residence above the §121 cap, or on real estate the seller doesn't want to redeploy into more real estate.
Read on jtcgroup.com →Every claim on this site reduces to one of the following. Read them yourself.
The structure is real, the citations are public, and the math is verifiable. If you'd like to talk through whether SIS fits your specific sale — with your CPA on the line — I'm here.
Talk to Hans — 213-414-2808