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Ensured Installment Sale (Structured Sale) Case Studies

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Below are some examples to illustrate different situations where the Ensured Installment Sale (Structured Sale) may be effective.

You may read through these case studies and find that you are much like the subjects in our case studies and can benefit by using the Ensured Installment Sale as an intrical part of your appreciated asset sale strategy.

Each case study will review the sellers background, financial numbers, and capital gains summary. Keep in mind that these case studies are for illustration purposes and do not include in-depth calculations and/or additional expenses that your situation may require.

Case #1: Male Age 60 Selling His Business to Retire

- Background: Seller has owned his large landscaping business for 23 years and started it with only $2,000 in capital, then purchased real estate for $198,000 where the company operates out of. . He wants to sell his business because he believes it is time to retire and spend more time watching the grandchildren grow up. Mr. Seller has found a buyer who has agreed to purchase his company including the real estate that it is headquartered on for $1.5 million. He likes the Ensured Installment Sale because he doesn't want to have to rely on the buyer to make payments, he wants a safe and guaranteed stream of payments for retirement, and he wants to defer as much capital gains as possible. This seller chooses to receive payments for the rest of his life with a guaranteed period of 20 years.

- Total capital investment including real estate $200,000
- Sales price $1,500,000
- Total Gain $1,300,000
- Desired down payment $300,000
- Amount placed into Structured Sale annuity $1,000,000
- Payments to seller (rest of life or 20 years; whichever is greater) $5,500/mo; $66,000/yr
- If seller lives another 25 years (odds are he will), total payments equal $1,650,000

- Capital Gains Summary - Mr. Seller will take an immediate capital gains hit of 15% on the $300,000 ($45,000) down payment and defer the rest to the years payments are received. Keep in mind that annuity payments include interest earned, so not 100% of each payment is taken into account when calculating capital gains tax.

- Conclusion - Mr. Seller is extremely happy because he knows he will NEVER outlive his money and that it is in a very safe, yet effective investment vehicle. His family is protected because Settlement Professionals Inc. structured the annuity so if Mr. Seller dies prematurely the family will still receive the payments to the 20 year guarantee. Best of all, Mr. Seller never has to worry about managing his portfolio, trusting his stock broker, or a downturn in the economy. His payments are guaranteed and will come no matter what!


Case #2: Female Age 52 Selling Her Apartment Complex

- Background: Seller bought a 30 unit apartment complex for $800,000 15 years ago and is tired of the property management headaches. She doesn't want to acquire a new investment property right now, but also isn't retiring. She wants to receive her equity over 10 years so she can reinvest her money into higher risk investments (potentially higher yield as well), while at the same time deferring and reducing her capital gains tax liability. Mrs. Seller was able to find a buyer who would purchase the property for $3,000,000; however, they agreed that the seller will carry a 2nd note for $200,000 because the buyer could not come up with the entire amount right now.

- Total capital investment $800,000
- Sales price $3,000,000
- Total Gain $2,200,000
- Desired down payment from buyer $100,000
- Seller carry 2nd note $200,000
- Amount placed into Structured Sale annuity $1,900,000
- Payments to seller for 10 years $19,095/mo; $229,140/yr
-Total payments to seller over the 10 years $2,291,400

- Capital Gains Summary - Mrs. Seller will take an immediate 15% capital gains hit on the $100,000 ($15,000) down payment. The rest of her payments (both from annuity and seller carry note) are deferred until the year payments are received. Mrs. Seller knows she is taking a risk by carrying the 2nd note, but feels comfortable with the buyers experience. If the seller would have opted for an all cash sale she would have to write a check to the IRS for $330,000 in the year of the sale. Since she is deferring using the Structured Sale, she is instead earning a pre-tax return on the check she would have written the IRS if she would have used an all cash sale.

- Conclusion - Mrs. Seller is happy because she is selling her apartment complex and deferring her capital gains taxes without having to acquire another property in its place. She is also protected from the buyers creditworthiness (except for the $100,000 seller carry 2nd) and knows that she will receive a $19,095 check guaranteed by a Fortune 100 corporation every month for the next 10 years.


Case #3: Male Age 38 Wanting to Do a 1031 Exchange, but Couldn't Find a Property In Time

- Background: Mr. Seller owns a small commercial retail shopping center and wants to "trade up" to a bigger property with a 1031 exchange. He bought the shopping center 6 years ago for $1,500,000 and it is now worth $4,500,000. He has found a buyer who was able to get financing to purchase the property. Mr. Seller has been working with a 1031 exchange facilitator and had the forethought to setup a backup plan to the 1031 with the initial 1031 intent letter. With his initial intent, the seller mentioned that he will do a 1031 exchange, but if the exchange fails plans to utilize the Structured Sale to continue capital gains deferral. Now, the time limit is almost up but he has not been able to find a suitable property and his deadline is approaching fast. He wants to acquire a new property, but doesn't want to pay capital gains tax right now if he can't find a property in time. So, Settlement Professionals Inc. comes in and works with his 1031 exchange facilitator set in motion the Ensured Installment Sale (Structured Sale) as the backup plan as they mentioned in their original intent. The seller can't back out of the sale of his shopping center because a contract has already been signed between him and the buyer. The deadline is around the corner and Mr. Seller decides to utilize the Ensured Installment Sale as his backup so he can defer capital gains and not write a big check to the IRS in the year of the sale. Mr. Seller decides to receive payments over a 5 year term. *

- Total capital investment $1,500,000
- Sales price $4,500,000
- Total Gain $3,000,000
- Desired down payment from buyer $300,000
- Amount placed into Structured Sale annuity $2,700,000
- Payments to seller $48,303/mo; $579,636/yr
- Total payments over the 5 year term $2,898,180

- Capital Gains Summary - Mr. Seller will pay the 15% capital gains tax on the down payment of $300,000 ($45,000) in the year of the sale and defer the rest until the years payments are received. By deferring, the seller will earn a return on the capital gains tax money that he would have paid if he wouldn't have used the Ensured Installment Sale (Structured Sale) as a backup to the 1031 exchange. If Mr. Seller wouldn't have had a backup plan, he would have had to write a check to the IRS for $405,000 in the year of the sale!

- Conclusion - Mr. Seller is happy; of course not as happy as he would have been if he would have found a suitable property for the 1031 exchange. He is receiving his money over a 5 year period so he has his entire principle very soon. Also, he can work with his CPA to find capital losses on his other investment properties that can "washout" much of his capital gains from this property...resulting in paying little or no capital gains tax at all on this property! Not only that, but Mr. Seller can utilize Settlement Professionals Inc.'s exclusive lending partners to leverage his proceeds into a new project before the 5 year term is up. Problems solved and everyone is happy!

* Contact SPI for details and resources on possibly incorporating the Ensured Installment Sale as a backup plan to a 1031 exchange. According to top tax experts, the Ensured Installment Sale may be a viable 1031 exchange backup plan when instituted ahead of time and correctly.

Case #4: Male and Female 60 Selling Bare Land to Developer

- Background: Mr. and Mrs. Seller have owned this 100 acre piece of land for over 35 years and paid only $50,000 for it (which was a lot back then). Until recently, the land wasn't extremely desireable. Last year the county moved the UGB out to include their land and developers have been knocking down their door to buy the land. Mr. and Mrs. Seller have discussed it and want to sell the land so they can live the retirement life they have always dreamed with enough left over to pass on to their children once they are gone. Their one stipulation is that they keep their home and one acre to live on. A reputable developer offer them $3,000,000 all cash. The sellers like the offer but don't like the idea of writing a check to Uncle Sam for over $440,000 this year or having to manage the rest of their money themselves (or trust an investment advisor to not lose their money). So, they decide to use the Ensured Installment Sale (Structured Sale) to help them defer capital gains tax as well as provide them a safe and guaranteed retirement income with no maintenance or worries.

- Total capital investment $50,000
- Sales price $3,000,000
- Total Gain $2,950,000
- Desired down payment from buyer $100,000
- Amount placed into Structured Sale annuity $2,850,000
- Payments to sellers (rest of life or 20 years; whichever is greater) $14,499/mo; $173,986/yr
- If sellers live another 25 years, total payments equal $4,349,650

- Capital Gains Summary - Mr. and Mrs. Seller pay the 15% capital gains tax ($15,000) on the $100,000 down payment in the year of sale. The rest of their capital gains is deferred until the years payments are received. Rather than pay Uncle Sam $440,000 for capital gains in the year of sale, they are only paying $15,000! The rest of their tax liability is earning a pre-tax return, which would be lost if they would have went with an all cash sale without the Ensured Installment Sale.

- Conclusion - Mr. and Mrs. Seller have achieved their retirement goals using the Ensured Installment Sale (Structured Sale). They deferred over $425,000 in capital gains tax and set themselves up so they never have to worry about money for the rest of their lives. If either the husband or wife dies prior to the other, the widow will continue to receive the same payments for the rest of his/her life. If both the husband and wife die prior to the 20 year certain guarantee, their heirs will continue to receive the payments up to the 20 year period. So, Mr. and Mrs. Seller now have a retirement and investment plan that requires no maintenance and is guaranteed by a strong Fortune 100 company. They know exactly how much they will receive each and every month and have the piece of mind that their family will be taken care of as well.


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*Keep in mind that the returns and/or annuity rates mentioned on this page are valid as of 1/25/07. For todays current rate and/or returns please contact us at 1-800-666-5584 for a customized situation analysis.



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