How much did David save by using a Structured Installment Sale?

David's total benefit was $446,000 compared to a traditional sale. This includes $110,000 in deferred taxes at closing plus $336,000 in additional interest earned over the 15-year note period. His traditional net proceeds would have been $490,000; with the SIS, total payments received equal $936,000.

What interest rate did David receive on his SIS note?

David selected a 15-year structured note at 6.5%, which is one of four published fixed rates offered by Iron Gate Holdings: 5% (5-year), 6% (10-year), 6.5% (15-year), and 7% (20-year).

How much does David receive per year?

David receives approximately $62,400 per year in quarterly payments ($15,600 per quarter). This replaced the rental income he lost when selling the property, providing predictable cash flow without the responsibilities of property management.

What taxes does David pay on the SIS payments?

David pays capital gains tax on only the gain portion of each installment as received, per IRC Section 453. By spreading the income over 15 years, David's annual taxable income stays lower, potentially keeping him in a lower tax bracket than he would have been with a lump-sum gain of $450,000.

Could David have used a 1031 exchange instead?

Yes, but a 1031 exchange would have required David to identify replacement property within 45 days and close within 180 days — and he would still own and manage real estate. The SIS allowed David to exit real estate entirely while deferring taxes and receiving predictable income without property management responsibilities.

What happens to the deferred taxes when David passes away?

Because the SIS uses a trust structure, David's heirs may receive a step-up in basis, potentially eliminating the deferred capital gains taxes entirely. This is one of the key estate planning advantages of a trust-based structured installment sale.

What types of investment property qualify for a Structured Installment Sale?

Residential rental properties, commercial real estate, agricultural land, vacation homes, multi-family buildings, and raw land all qualify. The property must have appreciated in value, and the SIS must be established before the sale closes.

What if David needed to access his funds before the 15 years are up?

Trust-based SIS structures offer more flexibility than annuity-based alternatives. Custom liquidity strategies can be negotiated with the trustee. However, early access to principal may trigger deferred taxes on the gain portion received.

Case Study

David's Investment Property

Real Estate — 15-Year Structured Note at 6.5%

$150K

Purchase Price (2006)

$600K

Sale Price

$450K

Capital Gain

The Challenge

David purchased an investment property in 2006 for $150,000. Over nearly two decades of ownership, he managed tenants, handled maintenance, and navigated the real estate market. By the time he decided to sell, the property was worth $600,000 — a $450,000 capital gain.

Under a traditional sale, David faced an estimated $110,000 in taxes at closing, including federal capital gains tax (15–20%), Net Investment Income Tax (3.8%), depreciation recapture (up to 25%), and state income taxes. That meant walking away with roughly $490,000 instead of $600,000 — and losing the rental income the property had been generating.

Traditional Sale Tax Burden

Federal Capital Gains (20%)

~$90,000

NIIT (3.8%)

~$17,100

State Income Tax (est.)

Varies by state

Depreciation Recapture (25%)

On depreciation taken

Estimated total tax at closing: $110,000

The SIS Solution

Instead of paying $110,000 in taxes at closing, David used a Structured Installment Sale through Iron Gate Holdings. Here's how it worked:

Promissory Note Issued

David selected a 15-year structured note at 6.5%. The IGH Trust issued a secured promissory note detailing his quarterly payment schedule of $15,600 ($62,400/year).

Property Sold & Funds Entered Trust

At closing, the $600,000 in sale proceeds went directly from escrow into the IGH Trust. David never took constructive receipt of the funds — the critical requirement for IRS compliance under IRC Section 453.

Deferred Taxation & Income Began

David began receiving quarterly payments of $15,600. Capital gains taxes are recognized only on the gain portion of each installment, spreading his tax liability over 15 years and keeping him in a lower bracket.

Revenue Estimator Comparison

Traditional Sale

Sale Price$600,000

Cost Basis($150,000)

Capital Gain$450,000

Tax Due at Closing($110,000)

Annual Income$0

Interest Earned$0

Net Proceeds$490,000

SIS — 15-Year Note at 6.5%

Sale Price$600,000

Cost Basis($150,000)

Capital Gain$450,000

Tax Due at Closing$0

Annual Income (6.5%)$62,400

Total Interest Earned$336,000

Total Payments Received$936,000

$110K

Tax Deferred at Sale

$336K

Additional Interest Earned

$446K

Total Benefit vs. Traditional

Key Outcomes for David

Replaced Rental Income

$62,400/year in quarterly payments replaced the rental income David lost when selling — without the hassles of tenants, maintenance, and property management.

Eliminated Upfront Tax Hit

Instead of paying $110,000 at closing, David pays taxes only on the gain portion of each quarterly installment as he receives it over 15 years.

Lower Tax Brackets

By spreading $450,000 in gains across 15 years, David's annual taxable income stays lower — potentially qualifying for lower capital gains rates.

Estate Planning Benefits

The trust structure supports step-up in basis for heirs, potentially eliminating any remaining deferred capital gains taxes entirely.

Frequently Asked Questions

Related Resources

Maria's Dental Practice

See how a business owner deferred $135K in taxes on an $800K sale

Selling Real Estate

Full guide to tax deferral for investment and rental property

Revenue Estimator

Run your own numbers and see your personalized SIS projection

Pro Forma Report

Generate a detailed financial analysis for your property sale

Selling an Investment Property?

See how much you could defer in taxes and earn in income with your specific numbers.

Run Your Numbers Schedule a Consultation

This case study is for illustrative purposes only and based on a hypothetical scenario using representative transaction data. Individual results will vary based on sale price, cost basis, holding period, tax bracket, state of residence, and depreciation history. Tax rates shown are estimates based on current federal rates as published by the IRS. This is not tax, legal, or financial advice. Consult your CPA, tax attorney, or financial advisor before making any tax deferral decisions. IRS Code Section 453 and Publication 537 govern installment sale treatment.