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IRS SECTION 453 with THIRD PARTY LENDER
relatively new twist to the installment sale 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
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
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.
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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
& Solution Research Consultants
This Is Not a Deferred Sales Trust!
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
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