A taxpayer owns a business or has an individual asset that has increased in value since they purchased it. When they are ready to sell the item, the taxpayer discovers that they will be paying approximately 28% of the increase in value as federal and state capital gains tax.

Selling the asset into an Intermediary Trust and having the Trust facilitate the asset’s sale will protect the taxpayer from paying the capital gains tax all at once.

The sale of the taxpayer’s asset to the Intermediary Trust is classified as an “installment sale.” An “installment sale” is defined under Section 453 of the Internal Revenue Code. IRC 453 has been around for over ninety years and is considered well-settled law.

The sales contract is a legal contract between the seller and the Intermediary Trust. The taxpayer enters into an installment sale contract with the Intermediary Trust. The trust acts as a third party to help facilitate the sale of your business or property. The taxpayer sells their asset to the Intermediary Trust. The Trust then sells the asset to the ultimate buyer. The Trust gives the taxpayer a promissory note, which promises to pay them the sale proceeds in structured installments. The taxpayer, as the seller, can decide how they want their money paid out. For example, the taxpayer can defer paying capital gains tax by investing their entire profit and receiving the interest of their investment.

Once the taxpayer sells their asset to the Trust, they have a choice: if they don’t need the income right away, they can invest the entire sum of their profits and collect the interest without paying capital gains tax. If the taxpayer need a portion of the money, they can pay some of the capital gains tax upfront on that portion and then invest the rest, deferring the taxes on the rest.

At any time, the taxpayer can choose to alter their payment structure. they have the freedom to defer their capital gains tax indefinitely. Or they can even withdraw the entire amount and pay the capital gains tax upfront if needed. Our specialists will work with the taxpayer to determine their financial goals.

Process: The taxpayer sells an asset to an Intermediary Trust. After the sale, the Trust gives the taxpayer a promissory note, which promises to pay them the sale proceeds in structured installments. The Trust in turn sells the asset to the ultimate buyer.

Deduction Layout: By using a capital gain deferral method of selling an asset to the Intermediary Trust, a taxpayer can reduce or defer state and federal capital gains tax. After the taxpayer sells an asset to the Trust a promissory note is issued to the taxpayer that outlines the structured installments. By not distributing the full amount of the sale from the Trust the taxpayer only has to pay capital gains tax on the amount that is distributed from the Trust. The Trust will then sell the asset to the ultimate buyer.

The installment sale is a legal and proven way to defer capital gains taxes. The Intermediary Trust is governed by Section 453 of the Internal Revenue Code. The Intermediary Trust has a track record of over twenty years of success. There have been thousands of closures and no legal issues regarding the IRS. There have only been a handful of IRS audits, which have all been released without any change.

Tax Opinion: IRC 453

The sale of your asset to the Intermediary Trust is classified as an “installment sale.” An installment sale is found under Section 453 of the Internal Revenue Code. IRC 453 is considered a well-settled law.

Below are just some of the assets that are eligible to be sold to the Intermediary Trust:
Small Businesses
Medical Practices
Dental Practices
Optometry Practices
Ophthalmology Practices
Veterinary Practices
Estates
Commercial Properties
Land
Real Estate
Art Collection Antiques
Jewelry

The Seller’s Motives: The Intermediary Trust converts your business or property asset into a steady income stream. Once the taxpayer sells their asset to the trust, they can invest the profits and let their money make interest for them. The taxpayer can then receive the dividends in monthly installments, creating a steady income.

Steps: We set up a 3rd party Intermediary Trust.
The taxpayer sells an asset to an Intermediary Trust utilizing an installment sale.
The Intermediary Trust issues a promissory note to the seller.
The Intermediary Trust pays the agreed installment payments to the seller, including any distributions.
The Intermediary Trust sells the asset to a buyer.

The following parties are involved in the capital gain strategy:

Client: The client is a person or business with an asset to sell.
Strategic Partner: The strategic partner is the agent who connects a client with us.
Our trusted law firm assists in putting the transaction together and drafts the necessary legal documents, and provides legal answers to you.
Buyer: The buyer is the person or business that purchases the asset from the Trust.

Selling an asset to an Intermediary Trust can effectively reduce a taxpayer’s capital gains tax obligation through a straightforward and time-tested approach. We look forward to working with you.