Save Money by “Structuring” the Sale of Your Business or Property

 

Save Money by “Structuring” the Sale of Your Business or Property

When selling your business, real estate and similar appreciated assets, it’s only natural for you to focus on earning as much profit as possible from the transaction.

Sometimes though, despite an otherwise attractive offer to purchase your asset, the capital gains taxes owed can erode the net value of your sale so dramatically that it can make consummation of the deal unworkable.

Even if you do accept the offer, you could find yourself in a higher-than-usual tax bracket for one year only paying taxes you’d sooner avoid.

Wouldn’t it be nice if there were a simple, safe way to reduce your capital gains? If you could spread your tax liability out over a number of years to keep your tax burden as low as possible?

Click HERE to read MetLife’s white paper
on Structured Installment Sales

Reduce Your Tax Liability

For more than fifty years, taxpayers have been able to defer the recognition of capital gains and interest on the sale of their qualifying businesses and properties through Installment Sales (Internal Revenue Code Section 453). The concept was limited, however, since the seller had to depend on the solvency of the buyer for the future payments.

Extensive research by a major life insurance carrier has resulted in the development of a solution to this challenge. By utilizing a specially designed assignment process to substitute obligors then funding the obligation with a fixed annuity, sellers can now enter into Installment Sale agreements where the future payments are guaranteed by a major life insurance company, rated A or better by A. M. Best, or United States Treasuries.

The IRS, Treasury and Tax Courts have all established, through rulings and case law, that substituting obligors on an Installment Sale can be permissible.

Structured Sales Make It Possible

Procedurally, here’s how a Structured Sale works:

With a Structured Sale, sellers can maximize their tax position in the year of the transaction by spreading out income over a number of future years when taxes might be more favorable. By ‘structuring’ your sale, you can:

You can rest assured knowing that all future payments are guaranteed by a highly rated company and there is absolutely no cost to you. No out of pocket expense and no management fees…ever. We get paid by the company if and only if you decide this option makes sense for you.

Three Things to Keep in Mind

  1. In order to take advantage of tax benefits, the sale must be ‘structured’ BEFORE the sales agreement is finalized.
  2. Not all transactions qualify. Clients should read IRS Publication 537 to ensure they meet eligibility requirements.
  3. Actual value to you will depend on what assumptions you make about future tax brackets. We can help with your analysis.

Because a Structured Sale is a detailed process that must be handled by a properly licensed firm such as ours, it is critical to let all parties, including your attorney (if represented) know that you are considering this option. We will then need to interface with all parties throughout the process to ensure proper paperwork is completed.

Contact Dan Finn Today

If you are considering selling your business or qualifying asset, don’t wait until everything is finalized before you act or it may be too late. Now is the time to contact Finn Financial Group to find out how we can help you.

Phone: 800.531.7466
E-Mail: [email protected]
CA Insurance License: 0A96173

The information on this web site is not intended to provide legal or tax advice. The use of a Structured Sale is a financial transaction that could have income tax implications for both the Seller and the Buyer. Various tax codes and regulations can be complex and parties are encouraged to seek independent legal and tax counsel to determine whether a Structured Sale is appropriate under the circumstances.

Finn Financial Group