A Structured Sale is a specialized type of installment sale. This special process permits sellers of certain property to turn their otherwise cash transaction into future tax-deferred payments.
A Structured Sale offers all the advantages of an installment sale without the security risk that makes the traditional installment sales arrangement unattractive for most people. Structured Sales allow the seller of an asset to pay taxes over time while having the payments guaranteed by a high credit quality life insurance company, who accepts assignment of the buyer’s 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 life insurance assignment company to accept the payment obligation. The assignment company then purchases an annuity from its related life insurance company with high financial ratings from A. M. Best. Case law and tax precedents have long supported this type of transaction. In addition, a properly perfected transaction will avoid issues with constructive receipt and economic benefit.
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