TDS Installment Sale Acquisitions vs. 1031 Exchange Transactions
TDS, as a principal for it own accounts, acquires appreciated assets from Sellers in a Tax Deferred Structured installment sale contract acquisition. TDS is a dealer in appreciated assets.
Disposition of Appreciated Assets on Tax Deferred Installment Sale are often easier and more flexible then 1031 Exchanges which have numerous limitations.
Installment Sale Contacts have been recognized since the first date the Internal Revenue Code was enacted and are less restrictive then 1031 Transactions. In most cases Installment Sales are a better alternative to a 1031 Exchange.
Benefits of TDS Installment Sale vs. 1031 Exchanges:
- No 45 day & 180 Day time period limitations
- No “Like Kind” reinvestment limitation
- No Replacement Investment – thus a true exit strategy
- No Limitation on the nature or scope of what is re-invested into if one so chooses to re-invest
- No Limitation on “used in business for profit” you can installment sale personal homes and personal property – collectables – No limitation to business or investment property
- No maintenance of debt requirement
- No need to delay disposition because you need to line up new financing or wait to find a replacement investment
- No limitation to carry over basis – No loss or recapture of depreciation deduction
- No over paying for replacement property to delay taxation
Installment Sales can Defer Taxation where a 1031 Exchanger has not identified a re-investment property within 45 days of Exchanger’s Sale date.
TDS offers three customizable types of Installment Sale Tax Deferral options for sellers:
- Traditional Legacy Type, where seller want a long-term payment structure, monthly payments for a term of years. This can also have note call options at eight-year intervals.
- Interest only payment with borrowing against the promissory note option to the seller to potentially provide liquidity – of the note with a Tax Free Loan.
- Structured Installment Sales, where the Installment Sale payment obligation is backed and guaranteed by a 3rd party financial institution.