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176. Does an Installment Sale Defer the Tax on Recapture of Accelerated Depreciation? No. Can the Tax on Recapture of Accelerated Depreciation Nevertheless Be Deferred When an Installment Sale Occurs? Yes.
162. Transfer a Family Business to the Next Generation During the Parent's Lifetime, Retain an Asset for Income, Give the Transferee a Stepped-up Basis, Defer the Gain on Sale, Support the Parent with Deductible Rent, and Finance the Transaction, Too
November 11, 2013
In many circumstances, S.Crow Collateral Corp. can enable a person who receives commission income to defer the ordinary income tax on that income, for as long as 30 years.
It’s not even hard to do. If, say, Merrily Payor will owe you a commission when an upcoming transaction closes, and she will pay you at that time, it may well be that S.Crow Collateral Corp. can take over the commission obligation to you, so that Merilee will pay S.Crow Collateral Corp. instead of you. If we can make things work on our side—and often we can—we’ll contract to pay the commission to you an agreed number of years (such as 30) from now. Since we won’t pay you now, you won’t owe the tax now.
At the same time, though, the lender with which S.Crow Collateral Corp. works likely will be willing to lend to you an amount of money equal to 95% of the commission which you would otherwise be paid in cash. S.Crow Collateral Corp.’s interest payments to you on what it owes you for the commission will fully (and assuredly) fund your interest payments on the loan, and S.Crow Collateral Corp.’s payment of the commission to you at the end of the contract term will fully (and assuredly) fund your repayment of the loan principal.
You’ll be able to keep and use or invest the entire loan amount, instead of only what’s left after paying tax on the commission. That will leave you with much more cash in hand.
So, whether your commission is for the sale of real estate, a business, an art collection, a professional practice, film rights, or whatever else, is there any reason not to check this out?—Stan Crow
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The Latest Installment addresses situations, questions and issues which are brought to us in the course of the consideration, negotiation or execution of transactions. We don't use the real names of parties to transactions, and we may edit the statement of the question to try to tell the story better. Please feel free to comment, or to take issue, or to raise your own question or situation. If you do the latter, please do not relate any confidential information.
The Latest Installment blog is edited by Stanley D. Crow, who is president of S.Crow Collateral Corp.