Structured Installment Sale Success Stories
ISR’s success as a national leader in custom Structured Installment Sale Transactions:
ISR is a national leader in custom Structured Installment Sale Transactions. Below are some of our clients’ success stories. ISR’s “Tax Deferral Expertise” is based on 20 years of LLM Tax Attorney, Capital Gain Tax Reduction transactional experience!
ISR is founded and directed by a retired LLM Taxation Attorney who has 20 years of capital gain tax deferral experience in the sale of appreciated real estate.
Since 2016, he has shifted tax deferral focus from 1031 Exchanges to Installment Sale Seller transactions, with Installment Sale transaction sizes ranging from $300,000 to $16 million. Now, ISR takes these successes and hand-selects which tax reduction advisors we bring on to work with Sellers of appreciated real estate.
Installment Sales apply and can be implemented on personal real estate that has never been rented out (a disqualification factor for 1031 Exchanges).
Installment Sales are also often a better fit for Sellers of appreciated investment real estate who don’t want to exchange into and have to manage a new investment property or take on more bank financing debt.
Installment sales can also be used to save a failing 1031 Transaction.
Understanding the specific details of installment sales is essential. But, sometimes, all of that detailed information can feel a bit too abstract. People want to understand how structured installment sales work in the real world and see how real people have benefited.
At Installment Sale Realty, we want to detail some of our success stories to highlight how installment sales could benefit you. Below, we will review how we have helped our clients reach their financial and tax-savings goals by using structured installment sales.
A few years ago, a couple came to us because they had an unexpected offer from a firm to buy out their home design company for $500,000. They established the business almost two years ago and slowly built it into a $75,000 per year turn-key operation. They had no outstanding debt and had built some retirement savings. By selling the business, they wanted to live off the profits until social security kicked in and they could combine it with their retirement savings.
Here was the issue: the couple worried that if they sold their business, they would owe $131,500 in capital gains. With their social security still years away, the couple was nervous that selling wouldn’t leave them enough money, especially due to the capital gains and taxes associated with them.
Before deciding to sell, the couple came to us asking about structured installment sales. Our team helped them understand that they could sell the business, but instead of receiving the $500,000 all at once, they could receive the payments spread over eight years via a structured installment sale. Essentially, that strategy converted a large capital gain into a series of “mini” capital gains. By breaking up the sale into eight parts, the couple was able to defer much of their capital gain taxes.
After utilizing the installment sale, we were able to help the couple increase their net income even though their gross income was less. That was all possible by reducing their capital gains tax bracket.
Here is another success story. David was a chef-owner of a popular restaurant. But after almost 40 years in the business, he was ready to sell and retire.
To limit his capital gains exposure, we recommended that David participate in a structured installment sale. After finding a buyer willing to participate, they settled on selling the restaurant for $1,102,500. They settled on a first payment of $202,500 and payments of $150,000 a year for the next six years.
Why did we suggest David participate in a structured installment sale in this case? First, if he sold his restaurant in a traditional sale, his capital gains tax rate would have been 20%. So, by utilizing the structured installment sale, we were able to help David reduce his capital gains tax to 15%. At first glance, that 5% difference doesn’t sound that significant, but over six years, that 5% savings really add up. And as Installment Sale Realty’s motto states: “A penny saved is a penny earned!”
Are you interested in learning more about how structured installment sales can benefit you? Contact the Installment Sale Realty team today to schedule your no-obligation consultation. You can also reach out to our team online.