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What happens come tax time with the Structured Sale?
By mauch | April 13, 2007
One question we get quite a bit about the Structured Sale is, “What happens come tax time if I use the Structured Sale?” The answer to this is really much simpler than you think.
As you know, the Structured Sale is basically a sale on installment sale where the buyer pays the sellers installment payments with a guaranteed annuity. Of course, there are more moving parts than just that… but that is the essence of the transaction.
Since the Structured Sale is an “installment sale”, it is taxed accordingly. Come tax time, your CPA will use IRS form 6252 to report the income from the installment payments.
Form 6252 simply breaks down each installment payment into interest income, capital gains, and returned basis. Your CPA should be very familiar with using this form because installment sales are extremely common in today’s world. The seller simply keeps track of the payments they receive (which will be known down to the penny when the Structured Sale is instituted) and reports them to the CPA or tax preparer.
Because the Structured Sale is a capital gains tax deferral method, many people believe that preparing the taxes on the sale will be complicated like the 1031 exchange tends to be. However, people need to remember that the Structured Sale is an installment sale… not an exchange of any type. So, the Structured Sale is a much simpler process when it comes tax time.
If you are a CPA or you are thinking about performing a Structured Sale, give us a call at 1-800-666-5584 and we can answer any questions you may have. The Structured Sale is a lot less complicated than many people have made it out to be (a 1031 exchange is much more complicated and has more places the transaction can go wrong!).
Topics: deferring tax, Tax deferral talk, Structured Sale |