Homeowners otherwise facing significant Capital Gains Taxes are now using “Structured Installment Sales” to preserve equity and receive secure monthly payments after close of escrow Background: The sale of a significantly appreciated personal residence often requires the payment of capital gains tax on the profits exceeding the $250,000 per spouse threshold. Some long-term homeowners are fortunate enough to have much more appreciation: $1 to $5 million is certainly not uncommon in Coastal Orange County. Understandably, there is little appetite for such long-term homeowners to sell… especially when capital gains taxes can take 40+ percent of the profit. One strategy for the long-term homeowner to defer and potentially lower their capital gains taxes is to break up the cash flows from the sale over several years using a “Structured Installment Sale” with payments made by *A+ Rated Life Insurance Company. Structured Installment Sales became available in 2019, so unless you are a CPA specializing in capital gains taxes, it is very unlikely you are aware of the IRS code which allows the technique.
Summary of the IRS approved Structured Installment Sale benefits: •
An attractive way for homeowners (or real estate investors) with substantial capital gains to defer and reduce their capital gains tax liability when selling.
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By spreading the payments through multiple years, capital gains taxes as well as net investment income taxes can be deferred and potentially reduced, while providing the seller with dependable monthly income.
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Unlike a “Seller Carry Back Loan”, the payments are reliably made by an A+ Rated Life Insurance Company.
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There is no risk of an “early payoff” as there is in a Seller Carry Back Loan (triggering large capital gains taxes in payoff year).
The following document is a White Paper (www.StructuredInstallmentSale.info) which was written to explain how the technique works. Additional articles have recently been written in the CPA Journal and Realty Times. Start with this document and then reach out to me for questions. I am happy to share the current articles and anything more recent I find with your Tax Expert or investment planner.
Important: DO NOT attempt to do a Structured Installment Sale without advice from your CPA/Tax Expert, Qualified Insurance Broker, and Realtor who are familiar with the IRS rules & best practices.