A Self Directed Installment Sale, referred to after this as "SDISSM", is an installment sale in which you establish a partnership with a Trusted party. The Trusted party forms an independent Trust and engages in an installment sale for your partnership interest. The partnership sells the property or asset to a buyer. You, acting as the partnership's investment manager, secure an outside buyer for the property. The Trust, who owns the partnership units, makes installment payments to you. This allows you to enjoy the deferral of capital gains and depreciation while removing the risks of a traditional installment sale via the self direction.
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Why Self Direction
A typical Installment Sale places risk on you in the form of buyer default, property deterioration or devaluation.
A Self Directed Installment Sale enables you to eliminate these risks and places you in control over the transaction and payments. This enables you to receive the benefits of capital gains and depreciation deferral while also eliminating the risks from the buyer.
Real Estate
The SDISSM allows the buyer to act in a normal manner, by purchasing the property from your business. You are able to direct and control all aspects of the transaction as the busines's Investment Manager. You sell your partnership units to a Trust on a installment basis. This allows the Trust to access monies from the sale in order to fulfill the installment agreement.
Small Business Owner
You can sell your own business with the SDISSM. Your 2nd business will sell the business. The Trust will enter into an installment sale for the partnership interest.
How it Works
Create a partnership. You must select a trusted party to act as 1% general partner.
You transfer the property to the partnership for 99% limited partnership.
You, acting as investment manager, secure a outside buyer for the property.
The partnership sells your property and receives the monies from the buyer.
You invest the monies for the Partnership.
The General Partner forms a Trust with a 51% partner. The Trust enters into a installment sale, with you, for the partnership units.
The Trust becomes 99% partner, and receives monies to make the installment sale.
Basic Rules
Seller cannot have entered into buy-sell agreement
No buy-sell resending and re-instatement allowed
Seller cannot have entered into escrow
Buyer must be an independent 3rd party - arms length
Seller cannot have direct access or ownership of an annuity
Buyer cannot be relieved of obligation to pay
What Cannot be done in a SDISSM
1245 Assets
Accelerated depreciation from property put in service pre-1986
Publicly traded stock
Benefits of the Self Directed Installment Sale
Deferral of capital gains and certain types of depreciation
End-to-End control over the transaction
Trusted party to act as buyer
No worries about defaults and foreclosure
Wide choice of investments for the funds
Establish a fixed term for payments
Establish variable returns and excess income
Opportunity to request early pay-off
Opportunity to change estate planning by not having paid capital gains taxes
