Income Tax Planning

Deferring Taxes While Preserving Growth Potential

For owners of highly appreciated businesses, real estate, and investment assets, a taxable sale can create substantial capital gains exposure. The IRC Section 453 Installment Sale strategy was designed to help defer recognition of those gains while creating long-term wealth transfer and investment planning opportunities.

Using a specially structured Non-Grantor Trust (NGT), qualifying assets may be sold to the trust in exchange for a long-term installment note, often utilizing favorable AFR interest rates. The trust may later sell the asset while deferring capital gains recognition for many years, potentially allowing the proceeds to remain fully invested and continue compounding before taxes become due.

In some cases, investment growth during the deferral period may significantly exceed the original value of the asset.

For clients seeking alternatives to immediate taxable sales or restrictive exchange structures, this strategy can provide increased investment flexibility, enhanced liquidity, and significant long-term tax planning advantages.

Watch the brief video overview to learn how the IRC Section 453 Installment Sale strategy works and how it may apply to your planning objectives.