Questions, answered
Frequently asked questions
Clear answers about Structured Installment Sales — how they work, who qualifies, the risks, and how they compare to the alternatives.
An installment sale under IRC §453 in which the buyer's deferred-payment obligation is assigned to a third-party assignment company that funds it with an annuity from a highly-rated life insurer. You receive guaranteed periodic payments and report gain over time on Form 6252. Learn more in the Knowledgebase →
No. The buyer's obligation can be assigned to an assignment company without triggering immediate gain, provided your payment rights are unchanged and you have no constructive receipt of the annuity. Substitution of the obligor is not, by itself, a §453B disposition (Rev. Rul. 75-457; 82-122; Cunningham). Learn more in the Knowledgebase →
Commentators cite a practical floor of roughly $500,000 of gain. Carrier minimums (e.g. MetLife / Metropolitan Tower Life) are commonly around $500,000 of structured proceeds, with terms up to 40 years.
No. Once the SIS closes, the schedule is irrevocable — by design. If you could reach the principal at will, that would be constructive receipt and would destroy the deferral.
No. Publicly-traded securities are excluded from the installment method under §453(k), as are inventory and dealer property. Learn more in the Knowledgebase →
Yes — and it pairs with the §121 exclusion ($250K single / $500K married). The excluded gain is tax-free; the SIS spreads the taxable gain above the exclusion. Learn more in the Knowledgebase →
In three parts: a tax-free return of basis, a capital gain (principal × gross-profit percentage, at 0/15/20% or 25% for unrecaptured §1250), and an interest/earnings portion taxed as ordinary income. Learn more in the Knowledgebase →
§1245 recapture is recognized as ordinary income in the year of sale and cannot be deferred; unrecaptured §1250 gain can be deferred but is taxed at a maximum 25% rate when recognized. Learn more in the Knowledgebase →
State guaranty associations (coordinated by NOLHGA) provide a backstop — typically $250,000 per payee per insurer ($500,000 in New York). Because that is below most SIS balances, sellers favor top-rated carriers and may split large cases across two insurers. See the full 50-state schedule. Learn more in the Knowledgebase →
No — they are different structures. A Deferred Sales Trust routes your sale proceeds into a third-party trust that invests them and pays you over time under an installment contract with the trust. An SIS has no trust: the buyer's payment obligation is assigned to an assignment company and funded by an annuity from a highly-rated insurer, and gain is reported under the straightforward application of IRC §453. Aggressive Deferred Sales Trusts have drawn IRS scrutiny; a properly structured SIS is not a listed transaction. Learn more in the Knowledgebase →
No — and the distinction matters. A monetized installment sale pairs §453 deferral with a loan against the note, putting 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. A legitimate SIS takes no such loan — the seller accepts genuine illiquidity, which is exactly what keeps it on the right side of the law. Learn more in the Knowledgebase →
The structured-settlement consultant is typically paid by the insurer, so there is usually no out-of-pocket cost for that service. Note that disclosing a strong preference for an SIS can affect price negotiation.
No — it is not one-size-fits-all. For sellers with high ordinary income, heavy recapture, or a need for immediate liquidity, a lump sum or another strategy may be better. Model both paths with a qualified advisor.
Yes. Schedules can be designed for a fixed term or for life, and remaining scheduled payments can pass to named beneficiaries. Learn more in the Knowledgebase →
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