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IRS SECTION 453 Tax Deferred Cash Out (TDCO) with THIRD PARTY LENDER

The TDCO is a relatively new twist to the installment sale. A TDCO is the IRS Section 453 Installment Sale coupled with a Third Party Lender (453M).

You sell your appreciated asset in an Installment Sale transaction pursuant to Section 453 of the Internal Revenue Code (without the credit and collateral risk that typically accompany an installment sale) to a dealer in capital assets under Section 453. Concurrently the dealer buys the asset from you on an interest-only, non-amortizing installment contract for as long as 30-years and resells it immediately, to the ultimate buyer, usually for cash.

You are introduced to a lender who is generally willing to lend you an amount of money that is comparable to your selling price, for you to invest as you please. The dealer makes installment payments to you that will fund your payments on the loan, which will typically be limited-recourse.

Entering into the installment contract doesn't require you to accept the loan, and borrowing from the lender doesn't require you to enter into the installment contract -- but if you do, the two work well together.

I try to be careful not to say to someone that if the person uses an installment sale coupled with a loan to sell a capital asset, the transaction *will* be a tax-deferred transaction under the installment-reporting provisions of Section 453. I am happy to say that I believe that will be the outcome, but I also try to caution that there is tax risk with this as with about anything, and the person should obtain his or her own tax and legal advice.

For case studies and to attend an on-demand webinar enter your contact information into my opt-in form and I will Email you the information.

This information is for those who are open and want to learn how this strategy might be of benefit for themselves or for someone they know.

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This Is Not a Deferred Sales Trust!  Not recommended for Section 1245 property.

Real Exit Strategies for Business Owners, Property & Real Estate Owners

This is a summary on the versatile aspects that might benefit the seller or you. we hold conference calls with qualified candidates who are selling or know someone who is selling a capital asset starting at $500,000.

But consider selling your appreciated capital asset in an Installment Sale transaction pursuant to Section 453 of the Internal Revenue Code (IRC), without the credit and collateral risk that typically accompany an installment sale.

Using an Installment Sale in IRC section 453 coupled with a Loan when selling capital assets should always be one of the choices to be considered to solve tax issues and maximize profit for the Seller when investment real estate and high-end residential property is to be sold or when a business is to be sold.

From a Seller’s viewpoint, in nearly every situation, this type of transaction is the most tax-efficient, versatile, un-entangled and profitable way to sell capital assets—whether the asset is held for business or investment purposes or entirely for personal use. It is important to note that this planning approach is not a tax shelter. It is simply a way to sell capital assets that has been in tax law since the laws were created in 1913. It is just not well known.

Here is some insight about what the installment sale coupled with a loan might achieve. If the asset is worth more than the Seller's tax basis, a 453M transaction, in tandem with a separate loan from a cooperating third-party lender might accomplish the following:

1. Deferral of the tax on the gain and depreciation recapture for as long as 30-years, with no net tax cost for that entire time

2. Because of that tax deferral and because of inflation in the interim, actual and substantial reduction in the real tax cost of the sale increases during the 30-year duration

3. Receive at close of escrow a near-equivalent amount of the installment sale in loan proceeds from a third party lender tax-free.

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