STRUCTURED INSTALLMENT SALES

According to the Better Business Bureau, there are businesses for sale each year totaling approximately $1 trillion. There are many times that amount of personal property (land and/or homes) for sale each year. For many years, taxpayers have been able to defer the recognition of capital gains and interest on the sale of their businesses and properties through an Installment Sale. Under Internal Revenue Code Section 453, a seller may spread the taxable proceeds (capital gains) of a sale over a number of years through periodic payments. This concept is simple and clean, and has been around for over 50 years. Yet the concept was limited due to the fact that the seller had to depend on the buyer (and the financial solvency and creditworthiness of that buyer) for their periodic payments. By utilizing Allstate International Assignments Ltd. to accept the periodic payment obligation from the buyer, and in turn fund that obligation by purchasing an annuity from Allstate Life Insurance Company, the seller now has a much more financially stable and creditworthy situation. The IRS Treasury, and Tax Courts have all established, through rulings and case law, that substituting obligors on an installment sale is similarly safe, simple and clean. The Structured Sale will allow a seller to not only defer recognition of capital gains on a business or property, but give them the ability to structure the pre-tax proceeds from the sale in a fashion that suits their specific financial needs.


SELL YOUR BUSINESS OR PROPERTY FOR AN ASSURED STREAM OF INCOME

The Challenge with Selling a Business or Property for Cash

►Challenge: Individuals selling a business or personal property for a lump sum are oftentimes faced with having to recognize the entire gain as taxable in the year of the sale.

►Solution: By making the sale and having part of the proceeds payable over several years, the seller can recognize the taxable gain in the tax years that the installment payments are received.

What is an Installment Sale?

An Installment sale is defined in Sec. 453 of the Internal Revenue Code of 1986 as “a disposition of property where at least 1 payment is to be received after the close of the taxable year in which the disposition occurs”.

In general, Installment Sales permit sellers to defer gains on certain property dispositions to the tax year in which the related sale proceeds are received.

Benefits of a Structured Sale
►Defer recognition of Capital Gains taxes
►Guarantee a rate of return
►Customize an exit strategy that provides long-term Financial Security
►Eliminate the relationship between the Buyer and Seller
►Allstate & the assignment company become the secure Third Party obligor to the seller
►Security – the Seller is not directly dependent on the financial solvency or credit worthiness of the Buyer

How it Works
►The Buyer assigns the obligation to an assignment company to make the periodic payments
►The assignment company funds the payment liability by purchasing an annuity from ►Allstate Life Insurance Company (part of the Allstate Corporation, headquartered in Northbrook, IL and a Fortune 100 Company)
►Allstate Life Insurance Company begins making payments to the seller as agreed to under the terms of the sale and issues an agreement to pay on the performance of the assignment company

ARTICLE : "The Advantages of Selling Appreciated Assets Via A Structured Sale"

 

IRS REQUIRED TAX DISCLOSURE: Information contained herein is not intended or written to be used, for the purpose of avoiding tax penalties. This document is written to support the promotion or marketing of the transactions or matters discussed. You should seek advice based on your particular circumstances from an independent tax advisor.