FIRST APPROACH
Structured Installment Sale
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01 / Cash & flexibility
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SECOND APPROACH
Taxable lump sum
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Compare strategies · IRC §453 in context
The SIS against every other deferral tool.
Every capital-gains strategy trades something off — liquidity, certainty, complexity, or who carries the risk. Filter the table to the option you're weighing; a profile of that alternative appears beneath it.
Compare vs
| Dimension | Structured Installment Sale | §1031 Exchange | Opportunity Zone | Deferred Sales Trust | Monetized Installment Sale | Charitable Remainder Trust | Plain seller note | Taxable lump sum |
|---|---|---|---|---|---|---|---|---|
| Asset eligibility | Broad capital assets | Real property only | Capital gains → fund | Broad | Broad | Broad | Broad | Any |
| Liquidity | Low — illiquid by design | Low (in property) | Low (10-yr hold) | Low–moderate (trust income) | High (loan against note) | Income only | Low | Highest |
| Income stream | Contractually fixed, periodic | Property cash flow | Fund distributions | Trust distributions | Loan now + installments | Annuity / unitrust | Note payments | None |
| Credit / payment risk | Insurer-funded; depends on issuer claims-paying ability | Market / tenant | Market risk | Trust investment risk | Lender + tax risk | Trust investments | Buyer default risk | N/A |
| Complexity | Moderate | Moderate | High | High | High | High | Low | Lowest |
| Cost to parties | Compare compensation, charges, and professional fees | QI & fees | Fund fees | Trustee / legal fees | Lender / setup fees | Trustee / legal | Minimal | None |
| Legal certainty | Fact-specific §453 and assignment analysis | High (statutory) | High | Moderate — IRS scrutiny | High tax risk; listing proposal located | High | High | High |
| Business-sale fit | Strong | No (real property only) | Limited | Possible | High risk | Possible | Yes | Yes |
§1031 Like-Kind Exchange
- What it is
- A tax-deferred swap of one piece of investment or business real property for another of like kind, governed by IRC §1031.
- How it defers tax
- Gain is rolled into the replacement property's basis; no tax is recognized until the replacement is sold without another exchange.
- Best fit
- Real-estate investors who want to stay invested in real estate and have a specific replacement property identified within 45 days and closed within 180.
- Trade-offs
- Real property only; strict timing; requires a qualified intermediary; deferred gain remains attached to the new property; depreciation recapture isn't eliminated.
- How SIS differs
- SIS works for almost any capital asset — not just real estate — and doesn't require buying a replacement. Instead of carrying gain into another property, the SIS converts the gain into insurer-funded periodic income.
Opportunity Zone Fund
- What it is
- An investment vehicle that places eligible capital gains into a Qualified Opportunity Fund deploying capital in designated low-income census tracts.
- How it defers tax
- Depends on the investment date. For investments made after December 31, 2026, eligible gain reinvested in a Qualified Opportunity Fund within 180 days is deferred on a rolling basis until the earlier of an inclusion event or five years, with a 10% basis step-up at five years (30% for a qualified rural opportunity fund); appreciation inside the fund can be excluded through a fair-market-value basis election after a 10-year hold, capped at the 30-year anniversary of the investment. Gain deferred under the earlier regime is still includible no later than December 31, 2026. (§1400Z-2 as amended by P.L. 119-21; Notice 2026-40.)
- Best fit
- Investors with realized capital gains who can accept a long, illiquid hold in a higher-risk development project.
- Trade-offs
- Fund-level risk and fees; sponsor and execution risk; the deferral period and basis step-up depend on the investment date (pre-2027 vs. post-2026 regime), and the new zone designations take effect January 1, 2027; the underlying property has to actually perform.
- How SIS differs
- SIS doesn't ask the seller to take development or equity risk. Payments are fixed by contract, funded by a life insurer's annuity, and predictable for budgeting — there is no fund to underwrite.
Deferred Sales Trust (DST)
- What it is
- A promoter-marketed structure in which sale proceeds are routed into a third-party trust that invests the funds and pays the seller over time.
- How it defers tax
- Promoters argue the seller has only an installment obligation from the trust, not constructive receipt — so gain is reported as trust payments arrive.
- Best fit
- Sellers willing to accept IRS scrutiny and ongoing trust-administration cost in exchange for marketed flexibility on the investment side.
- Trade-offs
- No published IRS blessing; aggressive variants have drawn enforcement attention; trustee fees, legal fees, and investment risk inside the trust; thin guaranty if the trust under-performs.
- Promoter risk
- Some promoters market DSTs with “flexible” payout schedules and unplanned lump-sum access. That post-closing control is hard to square with constructive-receipt doctrine and invites IRS recharacterization — treating the seller as in receipt of the full proceeds at closing, collapsing the deferral.
- How SIS differs
- SIS operates squarely under §453; the substitute-obligor authorities approve a greater change than the SIS makes — the assignment company is a co-obligor, and the buyer remains liable as a fallback. The assignment company (Co-Obligor) assumes the obligation and owns an annuity issued by a life insurer that funds the payments — there is no trustee picking investments.
Monetized Installment Sale
- What it is
- An §453 installment sale paired with a non-recourse loan against the note, putting most of the sale proceeds in the seller's hands at closing.
- How it defers tax
- The seller reports gain on the installment method as note payments arrive, while a parallel loan provides immediate liquidity.
- Best fit
- Marketed to sellers who want both §453 deferral and lump-sum cash — a combination the IRS views skeptically.
- Trade-offs
- IRS has proposed treating it as a listed transaction (REG-109348-22); DOJ has pursued promoters; reporting and disclosure obligations; meaningful audit and recharacterization risk.
- How SIS differs
- SIS generally involves restricted future payments. The absence of a loan does not establish tax eligibility or resolve all reporting obligations. Review the complete transaction and current authority.
Charitable Remainder Trust (CRT)
- What it is
- An irrevocable split-interest trust that holds the appreciated asset, pays the seller (or named beneficiaries) an income stream, and leaves the remainder to charity.
- How it defers tax
- The trust is tax-exempt and can sell the asset without immediate gain recognition; the seller is taxed as distributions are received under the four-tier ordering rules.
- Best fit
- Sellers with genuine charitable intent who want lifetime income plus a partial up-front charitable deduction.
- Trade-offs
- Irrevocable — the remainder really does go to charity; trustee, legal, and investment costs; income depends on trust performance; complex annual administration.
- How SIS differs
- SIS keeps the full economic value with the seller and the seller's heirs. No charitable remainder, no trustee, no investment risk on the seller's income — just fixed insurer payments.
Plain Seller-Financed Note
- What it is
- A traditional installment sale where the buyer signs a promissory note directly to the seller and pays principal and interest over time.
- How it defers tax
- Gain is reported under IRC §453 as the buyer's principal payments are received; interest is taxed as ordinary income as received by a cash-method seller (OID, where present, accrues).
- Best fit
- Sellers who know and trust the buyer, want to keep the deal simple, and are comfortable acting as the lender themselves.
- Trade-offs
- Buyer default risk falls entirely on the seller; no insurer guaranty; collection, servicing, and any workout are the seller's problem; payments only as reliable as the buyer's business.
- How SIS differs
- SIS keeps the §453 deferral, but the assignment company (Co-Obligor) assumes the obligation and owns an annuity issued by a life insurer that funds the payments, so payments don't depend on the buyer staying solvent. The seller is out of the credit-and-collection business at closing.
Taxable Lump Sum
- What it is
- A conventional closing — the buyer pays in full, the seller takes the proceeds, and the entire gain is reported in the year of sale.
- How it defers tax
- It doesn't. Federal capital-gains tax, NIIT, and any depreciation recapture are all paid up front; reinvestment happens with after-tax dollars.
- Best fit
- Sellers with an immediate, large use of cash (debt payoff, business reinvestment) or whose total gain is small enough that bracket-management has little value.
- Trade-offs
- Largest current-year tax bill; pushes the seller into top brackets and triggers NIIT; loses the time-value benefit of paying tax over years instead of all at once.
- How SIS differs
- SIS spreads the same gain across the chosen term, often keeping the seller in lower brackets and below NIIT thresholds — and the deferred tax dollars stay invested inside the annuity instead of going to the IRS at closing.
The SIS should not be confused with two distinct strategies it is sometimes mistaken for. A Deferred Sales Trust routes the sale proceeds into a third-party trust that invests them and pays the seller over time; its aggressive forms draw IRS scrutiny. A Monetized Installment Sale instead pairs §453 deferral with a loan against the note to put cash in the seller's hands up front — the IRS has proposed treating it as a listed transaction (REG-109348-22) and the DOJ has pursued its promoters. An SIS uses a different payment arrangement, but still requires transaction-specific tax analysis. The current Knowledgebase distinguishes the 2023 listing proposal from a final designation and records the review date.
Next step
Weighed the trade-offs? Now run your numbers.
The table tells you which tool fits the job; the calculator tells you what it's worth in dollars.