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Structured Sales
A structured sale is a strategy for tax deferral and wealth preservation where the seller of real estate receives a guaranteed stream of payments rather than a lump sum - effectively spreading out the cash flow and tax burden over many years, if desired.
Internal Revenue Code 453 and various Revenue Rulings permit sellers to defer taxes on any or all of their sale proceeds. The seller has complete control in determining when, how much and at what intervals is best for them.
Advantages of a Structured Sale:
- Financial Security — the structured sale utilizes a fully funded annuity backed by a Fortune 100 Life Insurance Company. This is a key advantage over the typical Installment Sale.
- Tax Deferral — taxable gain is deferred until the years when payments are actually received (known as constructive receipt).
- Exit from Real Estate — allows investor to transfer wealth into a stable asset with a predictable cash flow and no management requirements. An alternative or "end-game" to 1031 Exchanges.
- Flexibility — the seller can custom tailor the amount, frequency and duration of payments. There is no limit to the cash flows that can be structured.
- Simple and Affordable — a few documents need to be signed at closing. The fee to set-up is typically a few hundred dollars and has no ongoing expenses.
- IRC 1031 Rescue — a Structured Sale can be executed as a back up plan in the event a seller is unable to identify a suitable replacement property. Advance planning is necessary.
A "win-win" for BOTH the seller and buyer:
In the past structured sales were a concept/strategy used almost exclusively by sellers. However, distinct advantages exist for buyers as well. The most appealing benefits for buyers is the ability to obtain a more costly property with less cash and make more attractive offers in a highly competitive market.
For more information see:
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