Defer Taxation

Defer Taxation – Sale of Appreciated Assets

If you are selling highly appreciated assets(such as real estate or a business) you can invest the proceeds pre-tax and on a tax deferred basis. This is called a Structured Sale. A structured sale is a special type of installment sale pursuant to Internal Revenue Code Section 453. Installment sales permit sellers to defer gains on the sale of a business or real estate to the tax year in which the related sale proceeds are received. Structured sales allow the seller of an asset to pay taxes over time while having the payments guaranteed by a high credit quality alternate obligor, who accepts assignment of the buyer’s periodic payment obligation. Transactions can currently be done as small as $100,000.

In a structured sale, rather than the buyer paying the installments, the buyer pays cash, some of which is used as consideration for a third party assignment company to accept the payment obligation. The assignment company then purchases an annuity from a life insurance company with high financial ratings from A. M. Best. Case law and tax precedents have long supported substitution of obligors include Rev. Rul. 82-122 amplifying 75-457 and Wynne v. Commissioner 47 B.T.A. 731 and Cunningham v. Commissioner 44 T.C. 103. In addition, a properly handled transaction will avoid issues with constructive receipt and economic benefit.

A tax advisor should be consulted regarding tax consequences, if any.



“Synergy is our guiding light for deferring our contingent legal fees and planning for retirement. The lawyers at Panter Panter & Sampedro, myself included, have been working with them for over ten years using different methods to defer comp and plan for retirement.”

Brett Panter
Panter, Panter & Sampedro

"I don't think I've directly said "thank you" for helping us with Bridgett’s case. We sent the reduced payment to Medicaid and called Bridgett's mom to tell her approximately how much money was going to be left for Bridgett and she broke down over the telephone. Given only $25k of insurance and a $850k medical bill from the hospital she didn't think Bridgett would ever see a penny."

Tom L. Copeland
Jeffrey Meldon & Associates, P.A.

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