Structured Installment Sale
- Funds income for
- 20 yrs
- Total after-tax wealth
- $6,502,483
- Present value of after-tax wealth
- $3,621,051
- Lifetime tax
- $2,061,737
- Lifetime fees
- $0
Interest & OID — Structured Installment Sale
- Funding annuity
- Index-linked — scheduled payment rate 0.00%
- Scheduled payment / note stated principal
- $199,739 / $3,994,781
Scheduled payment rate: 0.00% — guaranteed floor (index rate 6.50% projected; credits above the floor are contingent payments)
Test rate (AFR): 4.92% — long-term (WAM 10.5 yrs), Rev. Rul. 2026-13, August 2026 (lowest of October 2026, September 2026, August 2026)
Stated principal $3,994,781 → issue price $2,506,162. Imputed interest $1,488,619 — the note's rate is below the AFR; the §453 selling price is $3,511,381.
OID: $1,488,619
Regime: §1272 accrualContingent payment debt instrument: the noncontingent installments state no interest, so they fail the adequate-stated-interest test; the issue price is their present value at the test rate and the difference is OID accrued under §1272 (Reg. §1.1275-4(c)(3): no QSI, no de minimis).
Election: not available — Contingent payments are not capped, so the maximum stated principal is not determinable at issuance (Reg. §1.1274A-1(b)(2)).
Basis recovery: ratable over the payment years — contingent selling price, no maximum (Temp. Reg. §15a.453-1(c)(3)); projected ratio 75.50%
Interest split: stated $0 / imputed (§483) $0 / OID (§1272) $1,488,619 / index-linked interest $2,061,122
Assumes the assignment company's assumption of the note as co-obligor is not a §453B disposition — see The Substitute-Obligor Question in the Knowledgebase.
Index-linked increases above the 0.00% floor are contingent payments. Each is split when paid (Reg. §1.1275-4(c)(4)(ii)): projected lifetime principal $2,203,098 (additional §453 selling price) and interest $2,061,122.
Form 6252: Line 5 selling price = $3,511,381
The guaranteed floor is below the AFR: $1,488,619 of principal is recharacterized as interest
- test the §1274(c)(3) exceptions
- consider the funding product
Wealth accumulation — net after-tax
Total economic position each year: after-tax cash received so far plus the after-tax value of the remaining balance if it were fully liquidated that year.
How long the income lasts
Capital remaining each year. A line hitting zero means the income stream stops.
Cumulative after-tax cash
Net cash in the seller's pocket over time.
Where the value goes
Net to seller vs. taxes vs. fees.
Side-by-side summary
| Metric | SIS ★ |
|---|---|
| Capital initially deployed | $5,000,000 |
| Years income is funded | 20 |
| Total net after-tax distributions | $6,502,483 |
| Terminal after-tax value | $0 |
| Total after-tax wealth | $6,502,483 |
| Present value of after-tax wealth | $3,621,051 |
| Lifetime taxes paid | $2,061,737 |
| Lifetime fees paid | $0 |
Educational illustration only — not tax or investment advice. Tax rates are computed per year by stacking each option's taxable income on the 2026 federal brackets (and the resident-state schedule); per-year overrides are managed in the Tax Override Editor (open from Advanced Options or by clicking any rate cell in the year-by-year schedule). §1245/§197 recapture is taxed in year 0; §1250 is recognized first. The SIS is taxed only on distributions (interest at ordinary rates; deferred gain at its own character). The Lump Sum and DST share one portfolio design, but the DST's earnings are taxed as ordinary income while its embedded deferred gain is recognized at its character as the portfolio is drawn down; the Lump Sum uses an ordinary/qualified/deferred split and can receive a step-up at death (the SIS/DST deferred gain is income in respect of a decedent and stays taxable). Results depend on your full facts, future rates, market performance, and final structure design.