MetLife recently released a White Paper on the potential tax advantages of structuring installment sales for certain kinds of properties. It noted that receiving lump sum sales proceeds on appreciated commercial property, homes or businesses could trigger significant capital gains taxes. One way to reduce the tax liability, it says, is to spread the sales proceeds over a number of years through a structured installment sale.

Tax Benefits. By receiving the sales proceeds in periodic payments instead of a lump sum the White Paper lays out how this could result in significantly lower capital gains taxes.

The White Paper includes an example of a real estate agency owner selling a portion of his business. It explains how the business owner’s capital gains obligation went from $124,000 without structuring to about $14,700 during the first year of the structured schedule and zero capital gains for the remaining years.

Structured installment sales and subsequent payments to the seller are set up much like a non-qualified structured settlement, through an insurer’s assignment company. It must be arranged before any sales proceeds change hands.

To read the MetLife White Paper, click here.

Call or contact me with questions about structuring installment payments for business or real estate sales.