What is an Installment Sale?

For a sale to be considered an installment sale, it must be a sale of qualified property in which the taxpayer receives at least one payment after the tax year of the sale.  Each installment payment received will consist of the following three components:

• nontaxable recovery of the investment
• taxable gain
• interest

What Should You Consider When Using an Installment Sale?

Since an installment sale permits you to receive the payment from the buyer in future tax years, you could be at the risk of the buyer's default in making payments to you.  In order to reduce this risk, the installment sale can be structured so that the payments will be funded with an annuity from a large, highly rated life insurer like Allstate Life Insurance Company (Allstate Life).  Allstate Life will help provide the assurance that you will receive future periodic payments.

How Can the Sale be Structured?

If the sale of the assets qualifies as an installment sale under IRC Section 453, here’s how the process typically works:

• You enter into a sale agreement with a buyer who promises to make payments for a stated number of years.
• The buyer assigns his payment obligations to an assignment company.
• The assignment company purchases an annuity from Allstate Life.
• Allstate Life makes the payments to you.