Educational reference only — not tax, legal, or investment advice. Examples use 2025–2026 federal rates and are illustrative.
I'm a
Structured Installment Sale · IRC §453

Defer the tax.
Guarantee the income.

When you sell a business, a building, or land for a large gain, a Structured Installment Sale spreads the capital-gains tax across years — and turns the proceeds into a secure, insurer-backed income stream.

Estimate your savings → How it works
For sellers

You're selling something you've built.

Keep more of it working for you — and turn a one-time windfall into income you can count on.

  • Spread the capital-gains tax across years
  • Guaranteed, insurer-backed income
  • See your own number in the calculator
Estimate my savings →
or
For advisors

You're advising on the sale.

Bring clients a deferral you can stand behind — settled law, broader reach than §1031, and the citations to back it.

  • Grounded in settled IRC §453 law
  • Doctrine, rulings & edge cases in the knowledgebase
  • Model client scenarios in seconds
Open the knowledgebase →
In plain English

A way to be paid over time — backed by an insurer, not the buyer.

An installment sale is simply a sale where you receive at least one payment after the year of sale. The SIS adds one decisive feature: the buyer's future-payment obligation is handed to a financially strong life insurer that pays you a guaranteed stream — so your income no longer depends on the buyer's solvency.

Spread the tax

Under IRC §453, gain is taxed only as each payment arrives — potentially keeping you in the 0% or 15% capital-gains bracket instead of 20%, and below the NIIT thresholds.

Guaranteed income

An assignment company takes over the obligation and funds it with an annuity from an A-rated insurer. The buyer is released; your payments are insurer-backed.

Design the schedule

Take some cash at closing, defer the start, add step-ups or balloons, or choose lifetime income. Far broader asset eligibility than a §1031 exchange — with no reinvestment required.

The four parties
01

Seller

Sells the asset, elects the installment method, and reports gain over time on Form 6252 as payments arrive.

02

Buyer

Agrees to the installment language, pays the price to the assignment company at closing — then is released.

03

Assignment company

Accepts the obligation via a non-qualified assignment and funds it with an annuity, isolating you from buyer credit risk.

04

Life insurer

Issues the annuity that funds the payments. Its claims-paying ability stands behind your income stream.

Why it holds up

A mature market, conservatively regulated.

$9.48B
Record structured-annuity premium written in 2024
$100B+
Reserves held industry-wide behind these obligations
50
U.S. states where the SIS is available (NY added July 2025)
50yr
Maximum payment term you can structure
The savings calculator

How much could spreading the gain save you?

Estimate your deferral and after-tax proceeds in under a minute. Model a taxable lump sum versus a Structured Installment Sale, with bracket position, NIIT, and a year-by-year payment schedule.

Estimated tax savings on the gain
$498,000illustrative
Case A — a retiring practice owner spreading a $2.25M gain over 20 years. Run your own numbers in the calculator.
Open the calculator → How it works first
How it works

The parties, and how the money moves.

Select any party to see its role. Funds flow from the buyer through the closing agent to the assignment company and insurer; guaranteed payments flow back to you. The buyer is released once the obligation is funded.

Select any party — the diagram traces the funds and payments it touches.

The ten-step chronology
01

Agree to be paid over time

At least one payment must fall after the close of the tax year of sale.

02

Engage your team

An SIS specialist and your tax advisor design the payment schedule.

03

Add installment language

An installment addendum goes into the purchase agreement before closing.

04

Delegate the obligation

The buyer's future-payment obligation is assigned to the assignment company.

05

Buyer funds at closing

The buyer pays the assignment company rather than the seller.

06

Non-qualified assignment

The assignment company formally accepts the obligation.

07

Annuity purchased

A highly-rated insurer's annuity is sized to fund the schedule.

08

Title transfers

You receive any agreed closing lump sum (taxable that year).

09

Payments begin

The insurer pays you on the schedule you designed.

10

Report annually

File Form 6252 each year for the life of the obligation.

The defining rule: the structure must be in place before you have any right to the cash — otherwise you're in constructive receipt and the deferral collapses.

Is it right for you?

Six questions. A clear read on fit.

The SIS is powerful but not universal. Answer a few questions for an instant suitability read — then verify with an advisor.

Compare strategies

The SIS against the alternatives.

Every deferral tool trades something off. Filter the table to see how the SIS stacks up against the option you're weighing.

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 Guaranteed, periodic Property cash flow Fund distributions Trust distributions Loan now + installments Annuity / unitrust Note payments None
Credit / payment risk Insurer-backed; very low 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 Often none (insurer pays consultant) QI & fees Fund fees Trustee / legal fees Lender / setup fees Trustee / legal Minimal None
Legal certainty High — settled §453 High (statutory) High Moderate — IRS scrutiny Very low — listed transaction High High High
Business-sale fit Strong No (real property only) Limited Possible High risk Possible Yes Yes

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. A legitimate SIS is neither: it accepts genuine illiquidity in exchange for its settled tax treatment.

Worked examples

Three sellers, three outcomes.

Including, deliberately, one where the SIS helps less. All figures are illustrative, federal-only, at 2025–2026 rates.

Strong fit

Retiring Veterinary-Practice Owner

Robert, 61, selling his practice (goodwill) with minimal other income and Social Security deferred to age 70.

Single · Texas — no state income tax

Sale price$2,500,000
Adjusted basis$250,000
Total gain$2,250,000
Cash at closing$250,000
Amount structured$2,250,000
Term / rate20 yrs @ 5.0%
Federal outcomeCash saleStructured sale
Federal tax
Federal tax on the sale$412,928$292,584
Federal tax on earnings$0$153,398
Net investment income tax$77,900$950
Total federal tax$490,828$446,932
Effective tax rate on the gain21.8%13.0%
What you keep
Total cash received (incl. interest)$2,500,000$3,860,916
Net after-tax cash (actual)$2,009,172$3,413,984
Net after-tax cash (present value)$2,009,172$2,201,043
Spreading the gain keeps Robert in the 0% / 15% capital-gains bands and under the NIIT threshold nearly every year. The one-time ~$491K tax bill becomes ~$25K a year, total lifetime federal tax comes in lower than a cash sale, and he collects ~$1.36M of interest income on top.
More details — rationale, assumptions, year-by-year schedule

Why this result

Because Robert has almost no other income while the structure pays out, each year's recognized gain largely falls in the 0% and 15% long-term capital-gains brackets, and his income stays under the $200,000 NIIT threshold in every year. A cash sale would force the entire $2.25M gain through the 20% bracket at once and trigger the full 3.8% NIIT — the source of nearly all the difference.

Key assumptions

Filing status
Single
State income tax
None (Texas)
Gross-profit ratio
90.0%
Structure
$2,250,000 over 20 years at 5.0% (level payment ≈ $180,546/yr)
Other income
Minimal; Social Security deferred to age 70
NIIT threshold
$200,000 (single)
§453A interest charge
None — aggregate installment obligations are under the $5,000,000 threshold

Structured sale — year by year

Each payment is part return of capital, part recognized gain, part interest. "Federal tax" is the tax attributable to the sale that year.

YearPaymentInterestGain recognizedFederal tax
Closing$250,000$0$225,000$25,085
1$180,546$112,500$61,241$25,385
2$180,546$109,098$64,303$25,096
3$180,546$105,525$67,518$24,792
4$180,546$101,774$70,894$24,473
5$180,546$97,836$74,439$24,139
6$180,546$93,700$78,161$23,787
7$180,546$89,358$82,069$23,418
8$180,546$84,799$86,173$23,031
9$180,546$80,011$90,481$22,624
10$180,546$74,984$95,005$22,196
11$180,546$69,706$99,756$21,748
12$180,546$64,164$104,743$21,283
13$180,546$58,345$109,980$20,507
14$180,546$52,235$115,479$19,682
15$180,546$45,820$121,253$18,816
16$180,546$39,083$127,316$17,906
17$180,546$32,010$133,682$16,952
18$180,546$24,584$140,366$16,011
19$180,546$16,785$147,384$15,114
20$180,546$8,597$154,754$14,888

Educational illustration only — not tax advice. 2025 federal brackets (post-OBBBA), state tax excluded.

Ideal fit

Highly Appreciated Inherited Farmland

The Henderson family selling 320 acres with a stepped-up basis, all long-term gain, no mortgage.

Married filing jointly · Iowa

Sale price$3,200,000
Adjusted basis$800,000
Total gain$2,400,000
Cash at closing$400,000
Amount structured$2,800,000
Term / rate15 yrs @ 4.9%
Federal outcomeCash saleStructured sale
Federal tax
Federal tax on the sale$429,192$233,442
Federal tax on earnings$0$88,186
Net investment income tax$81,700$1,900
Total federal tax$510,892$323,528
Effective tax rate on the gain21.3%9.8%
What you keep
Total cash received (incl. interest)$3,200,000$4,419,071
Net after-tax cash (actual)$2,689,108$4,095,543
Net after-tax cash (present value)$2,689,108$2,954,478
With no other income, spreading the gain holds the family in the 15% capital-gains band most years and all but erases NIIT. Total federal tax falls by ~$187K even after the tax on ~$1.22M of new interest income.
More details — rationale, assumptions, year-by-year schedule

Why this result

With no other income, the family's recognized gain sits mostly in the 15% capital-gains band each year and their income stays under the $250,000 NIIT threshold in all but the first year. A cash sale would push the full $2.4M gain into the 20% bracket and trigger the entire 3.8% NIIT at once. The structure also generates roughly $1.22M of interest income they would not otherwise have.

Key assumptions

Filing status
Married filing jointly
State income tax
Iowa — not modeled (see note)
Gross-profit ratio
75.0%
Structure
$2,800,000 over 15 years at 4.9% (level payment ≈ $267,938/yr)
Other income
None significant
NIIT threshold
$250,000 (MFJ)
§453A interest charge
Does not apply — farm property is excepted, and obligations are under $5,000,000 regardless

Structured sale — year by year

Each payment is part return of capital, part recognized gain, part interest.

YearPaymentInterestGain recognizedFederal tax
Closing$400,000$0$300,000$27,670
1$267,938$137,200$98,054$27,790
2$267,938$130,794$102,858$27,101
3$267,938$124,074$107,898$26,198
4$267,938$117,024$113,185$25,087
5$267,938$109,630$118,731$23,923
6$267,938$101,873$124,549$22,701
7$267,938$93,735$130,652$21,419
8$267,938$85,199$137,054$20,075
9$267,938$76,245$143,770$18,665
10$267,938$66,852$150,814$17,185
11$267,938$56,999$158,204$15,633
12$267,938$46,663$165,956$14,179
13$267,938$35,821$174,088$12,688
14$267,938$24,447$182,618$11,830
15$267,938$12,516$191,567$11,382
  • Figures are federal only. Iowa imposes a state income tax that is not modeled here, and Iowa provides special treatment for certain farm capital gains that could further affect the comparison — a seller should confirm state treatment with a local advisor.

Educational illustration only — not tax advice. 2025 federal brackets (post-OBBBA), state tax excluded.

Less favorable

Investment Property with §1250 Recapture

David & Lisa, both still working with combined salary of $180,000/yr, selling a depreciated rental.

Married filing jointly · Nevada — no state income tax

Sale price$1,600,000
Adjusted basis$470,000
Total gain$1,130,000
Cash at closing$200,000
Amount structured$1,400,000
Term / rate10 yrs @ 4.8%

$180,000 unrecaptured §1250 (25% max) + $950,000 regular long-term gain.

Federal outcomeCash saleStructured sale
Federal tax
Federal tax on the sale$212,422$184,536
Federal tax on earnings$0$87,261
Net investment income tax$40,280$28,709
Total federal tax$252,702$300,506
Effective tax rate on the gain22.4%18.9%
What you keep
Total cash received (incl. interest)$1,600,000$1,995,497
Net after-tax cash (actual)$1,347,298$1,694,991
Net after-tax cash (present value)$1,347,298$1,354,778
Their $180K salary fills the lower brackets, so the structure's interest is taxed at 22–24% and total federal tax runs higher than a cash sale. They keep slightly more actual cash, but the present-value edge is razor-thin and depends on the discount rate — the weakest fit of the three.
More details — rationale, assumptions, year-by-year schedule

Why this result

David and Lisa's $180,000 salary already fills the 10–22% brackets every year, so the structure's interest income is taxed at 22–24% and the recognized gain stacks on a higher base. Total federal tax therefore runs higher than a cash sale. They do keep more actual cash — the interest is real income — but the present-value advantage is razor-thin and hinges on the discount rate: a still-earning couple who could reinvest lump-sum proceeds might do as well selling outright. The $180,000 of unrecaptured §1250 gain is recognized first under the installment method, front-loaded into the first two years at up to 25%.

Key assumptions

Filing status
Married filing jointly
State income tax
None (Nevada)
Gross-profit ratio
70.625%
Structure
$1,400,000 over 10 years at 4.8% (level payment ≈ $179,550/yr)
Other income
$180,000 combined salary, ongoing
Unrecaptured §1250 gain
$180,000, recognized first in cumulative-gain order
NIIT threshold
$250,000 (MFJ)
§453A interest charge
None — aggregate obligations under $5,000,000

Structured sale — year by year

Each payment is part return of capital, part recognized gain, part interest.

YearPaymentInterestGain recognizedFederal tax
Closing$200,000$0$141,250$35,444
1$179,550$67,200$79,347$33,262
2$179,550$61,807$83,156$28,992
3$179,550$56,156$87,147$28,212
4$179,550$50,233$91,330$27,470
5$179,550$44,025$95,714$26,693
6$179,550$37,520$100,308$25,878
7$179,550$30,703$105,123$25,024
8$179,550$23,558$110,169$24,130
9$179,550$16,071$115,457$23,192
10$179,550$8,224$120,999$22,210
  • The §1250 recapture is concentrated in years 0–1, which is why the early-year tax is higher than a level spread would suggest.

Educational illustration only — not tax advice. 2025 federal brackets (post-OBBBA), state tax excluded.

Safety & security

Built to be safe in layers.

The buyer drops out, a top-rated insurer steps in, conservative regulation governs it, and a guaranty system backstops it.

01

Buyer-credit isolation

The assignment company assumes the obligation and funds it immediately — your income no longer depends on the buyer's solvency.

02

Highly-rated insurers

Funding carriers are A-class life insurers (e.g. MetLife / Metropolitan Tower Life, A+ Superior by AM Best).

03

Reserves & capital

Statutory reserves and risk-based capital are mandated; leading carriers run RBC ratios around 400–600%.

04

Guaranty backstop

State guaranty associations (coordinated by NOLHGA) cover annuity benefits — typically $250K per payee per insurer — if a carrier fails.

05

Reinsurance

Insurers spread large or concentrated obligations across multiple balance sheets, adding further capacity and stability.

Lesson

Diversify large cases

The 1991 Executive Life failure showed asset quality matters. For balances of $5–10M, splitting across two top-rated carriers reduces concentration risk.

Questions, answered

Frequently asked

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.
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).
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.
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.
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.
§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.
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.
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.
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.
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.
No questions match that search. Try the full knowledgebase.
The knowledgebase

Go as deep as you need.

Ten chapters from history and mechanics to tax law, regulation, safety, and a glossary — fully searchable, grounded in IRC §453 and 100+ cited sources.

01
History & Origins
From thalidomide-era settlements to a modern capital-gains tool.
 02
How an SIS Works
The four parties, the deal chronology, three-component taxation.
 03
The Tax Framework
IRC §453 in depth, Form 6252, the §453A interest charge.
 04
Substitute-Obligor
Must the buyer remain obligated? The rulings that say no.
 05
Use Cases by Asset
Real estate, residences, businesses, farmland, and more.
 06
SIS vs. Alternatives
1031, Opportunity Zones, DST, CRT, notes, lump sum.
 07
Regulatory Framework
The legal and insurance stack that gives the SIS certainty.
 08
Safety & Security
Ratings, reserves, guaranty associations, reinsurance.
 09
Pros, Cons & Risk
Nine benefits, thirteen risks, a suitability matrix.
 10
Implementation
Step-by-step setup, due diligence, red flags to avoid.
 ★
Glossary
Every key term defined — from basis to substitute obligor.
 ★
Regulatory Authorities
Full citation catalog — every Code section, ruling, PLR & case, annotated.
Open the full knowledgebase →
Get started

Model your sale with a SIS Specialist.

The right answer depends on your asset, your income, and your timeline. Tell us a little about your sale and we'll show you the numbers both ways — with no obligation.

✓ A side-by-side lump-sum vs. SIS tax model
✓ Carrier and schedule options for your goals
✓ Coordination with your CPA or attorney

By submitting you agree to be contacted about your inquiry. This is an educational resource, not tax or legal advice.

Thank you. An advisor will reach out shortly to build your personalized lump-sum vs. SIS model. In the meantime, explore the knowledgebase.