What Is Structured Sale Annuity?

A structured sale annuity is a tax deferral strategy that can reduce your capital gains tax owed. When your property--real estate or other--appreciates in value significantly, selling the property exposes you to a large capital gains burden. Instead of paying this all at once, you can elect to defer the payments by also deferring the profits you earned on the sale of the asset.

Deferring Sale Profits

Instead of selecting to receive the entire profit at once, you can elect an annuity, or yearly payment plan. This annuity is managed by an insurance company. You pay the company all of your profits on the sale, meaning you never collect a penny of the profit earned. In exchange, the insurance company offering these individual contracts pays you a portion of the profit on a yearly basis until your plan is used up.

Deferring Capital Gains

You will be taxed on the income from your annuity year-by-year instead of up front. Using this model, you may even elect to minimize your burden by selecting a plan where the profits are offset by other capital losses on an annual basis. You can defer income for up to 20 years, in turn deferring capital gains tax for at least that long.