The 1031 Exchange Institute

Welcome to The 1031 Exchange Institute™. The 1031 Exchange Institute is your complete online resource for 1031 exchange, 1033 exchange, 1034 exchange, 721 exchange, 453 installment sale and 121 exclusion information.  Information will also be provided regarding Self-Directed IRAs, including Traditional IRAs, ROTH IRAs, SEP-IRAs and SIMPLE IRAs. 

The 1031 Exchange Institute is dedicated to educating and informing real estate investors and their advisors on the benefits of 1031 tax-deferred exchanges and other tax deferred and tax exlcusion strategies so they can make better informed investment decisions.

Benefits of the Structured Sale

The Structured Sale can provide certain investors with exactly the right mix of cashing out and income tax deferral options.  They can sell their property or asset today, defer some or all of their income taxes into the future, and not have to reinvest in like-kind replacement property. 

The Structured Sale does trigger the capital gain tax, but it is deferred over a period of time, so it is not for investors that do not want to pay taxes.  Those who do not want to pay at all must look elsewhere for their capital gain tax deferral strategy. 

Let's review the various benefits and advantages that the Structured Sale provides to those investors for which it is a suitable capital gain tax deferred strategy. 

Benefits and Advantages of the Structured Sale

The Structured Sale has the ability to generate substantially more money over the long run compared to a taxable sale (i.e. cashing out).  It is also superior to a direct installment sale contract because there is no risk that the borrow will default on the seller carry back note.

The benefits and advantages of the Structured Sale over other tax-deferred capital gain income tax strategies include, but are not limited to, the following:

  • Tax Deferred.  Capital gain taxes are deferred over the term of the installment sale note, which is determined by the investor.  Capital gain income taxes are recognized and paid as principal payments are received by the investor (seller).  Depreciation recapture taxes are not deferred; only capital gain taxes are deferred. 
  • Estate Tax Planning Benefits.   The property or asset is sold at its current fair market value, thus freezing the fair market value of the property or asset for estate tax planning purposes. 
  • Other Estate Planning Benefits.  The sale transaction can be structured using one or multiple installment sale notes to accomplish a variety of tax, gift or estate planning strategies.  
  • Maintains Family Wealth.  The Structured Sale can help maintain and pass on the family wealth through the income tax deferral benefits and use of the multiple installment sale notes.
  • Create Liquidity for Estate Planning Purposes.  Disposing of a property or an asset through a Structured Sale can convert an illiquid property or asset into a positive cash flow investment.
  • Retirement Planning.  The installment sale notes can be structured to provide or increase your positive cash flow for retirement planning purposes.  Properties that generate little to negative cash flow can be converted into positive cash flow for retirement planning purposes. 
  • Avoid Probate Administration:  A properly designed Structured Sale can assist with estate planning in order to avoid probate administrative proceedings. 
  • Eliminates Risks of Property Ownership: The Structured Sale allows the investor to dispose of high risk assets such as real estate and convert them into no risk investments.

Tax deferred and tax exclusion income tax planning can be very confusing.  There are many tax deferral or tax exclusion tools available in your income tax planning tool box.  The Structured Sale and DST are two of the many tools available to you.  It is extremely important that you meet with your legal, financial and tax planning advisors to ensure that you choose the tax planning tools that are most suitable for you.