A common way to structure proceeds from a larger real-estate transaction, or sale of a business is to create a ’structured sale’. This is essence is an annuity, that Wikipedia defines as follows:

A structured sale is a special type of installment sale pursuant to the Internal Revenue Code.^[1] Installment sales permit sellers to defer recognition of gains on the sale of a business or real estate to the tax year in which the related sale proceeds are received. Structured sales allow the seller of an asset to pay taxes over time poker on line gratisparty poker downloadpoker americano gratisbetandwin pokerstreap poker gratissoftware poker gratisdownload poker on linegioco poker,scarica gioco poker,gioco carte pokerpoker on line,gioco poker on line,giochi di poker on linetorneo poker gratistavolo multigicotori pokeril pokerpoker slot gratisstud pokerguida poker onlinegiochi poker per pcdd tournament poker 2.0world poker tournamentgiochi online pokerpoker online gratuitocard studsuper pokeromaha highstrip poker game online,strip poker online gratis,strip poker onlinepoker multiplayerpoker multiplayer onlinegiochi on line pokerseven card stud in lineapoker d assicasino en lignesistemi gioco roulettecasino italia gratisplay baccarat onlinecasino bonus gratismigliori casino on linegiochi casino flashmobile casino gamesroulette 36casino pc,pc game casino,casino pocket pcblog casino onlineblack jack in lineacasino on line legalicasino gratis slot machinesistemi per la roulettecasinos onlinevideo poker online gratisvideo poker gratuitocasino tropez gratisregolamento roulettekeno online while having the payments guaranteed by a high credit quality alternate obligor, who accepts assignment of the buyers periodic payment obligation. Transactions can currently be done as small as $100,000.

In a structured sale, rather than the buyer paying the installments, the buyer pays cash, some of which is used as consideration for a third party assignment company to accept the payment obligation. The assignment company then purchases an annuity from a life insurance company with high financial ratings from A. M. Best. Case law and administrative precedents supporting substitution of obligors.^[2] In addition, a properly handled transaction will avoid issues with constructive receipt and economic benefit.

While negotiating the installment payments, the seller is free to design payment streams with a great deal of flexibility. The seller recognizes capital gain in each year an installment payment is received. Interest is imputed and taxed annually, even in years during the contract where no installment payments are received. Taxation is the same as if the buyer were making installment payments directly.

Structured sales are an alternative to a section 1031 exchange, which defers recognition of capital gain, but forces the seller to continue holding some form of property. Structured sales work well for sellers who want to create a continuing stream of income without management worries. Retiring business owners and downsizing homeowners are examples of sellers who can benefit.

The structured sale must be documented, and money must be handled in such a way that the ultimate recipient is not treated as having constructive received the payment prior to the time it is actually paid. For the buyer, there is no difference from a traditional cash-and-title-now deal, except for additional paperwork. Because of tax advantages to the seller, structuring the sale might, however, make the buyer’s offer more attractive. Because the buyer has paid in full, the buyer gets full title at time of closing.

There are no direct fees to the buyer or seller to employ the structured sale strategy. The structured settlement specialist who implements the transaction is paid directly by the life insurance company that writes the annuity.

The internal rate of return is comparable to long term high quality debt instruments.

Allstate Life was the originator of the structured sale concept and until recently was the only structured settlement annuity company whose product was available for the structured sale transaction. Prudential has begun to use its non-qualified assignment product on a limited basis. By mid 2007, Aviva Life may be in the market as well.

Don Murphy of CAS has made his presentation on Structured Sales available here:

structured-sales.pdf

Capital Asset Structuring (CAS) is one of a select few companies with the expertise to both advise and complete a structured sale and obtain an underwriting agreement through a major insurance company. In this very specialized process CAS functions as a full service facilitator for the structured sale of a business or investment real estate transaction.

Based in Florida and operating nationwide, CAS representation includes highly skilled professionals in the areas of law, accounting, investment banking, real estate, finance and insurance. In addition, as a complement to our skill level, a strategic partnership has been forged between CAS and CDA of America, one of the primary innovators of insurance products in the nation and a national leader in the structured sales process. CAS is also a charter member of the Advisory Resource Group, the only nationwide association of companies dedicated to the professional application of the structured sales process.

CAS professionals are available, without charge, to confer and meet with owners and investors and their broker representatives who are contemplating or who have listed an asset in this arena. Do not proceed to close a sale without exploring the tremendous advantages of the process offered by Capital Asset Structuring.

A structured sale is a proven process for implementing the sale of a business or investment real estate and defers the payment of the capital gains tax. In this specialized transaction which does not interfere or take away from the traditional broker activities, an installment payment stream is agreed to by both the seller and buyer and the taxes are deferred until payment is received. The installment payments are underwritten by a major insurance carrier and can be creatively designed according to the seller’s wishes.

The advantages to this process are very strong. The seller gets a guaranteed payment stream which can be creatively structured to meet a variety of personal or estate needs without risk of nonpayment from an individual buyer or payment acceleration. There is also the opportunity to lock in significant pre-tax investment returns and the possibility of a unique arrangement for asset protection

As of October 16, 2006 the IRS allows for deferred payment of capital gains taxes on real estate and corporate sale proceeds…

In a structured real estate sale, or the sale of a corporation, the seller is now eligible for installment sale reporting to the IRS.

The benefits to the seller can be significant in that capital gains tax is deferred and the full proceeds from the sale can be invested and earn a return.

In addition to potentially significantly decreasing (or, based on the term of the installments) eliminate completely the net expense of the payment of capital gains taxes to the IRS.

This is new legislation, and may be beneficial to you if you face significant capital gains taxes on the sale of a corporation or real estate property