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Market Data*
210,000 businesses sold annually out of 1,122,000 for sale. Level 1 businesses sell for <$500,000. Level 2-3 range, or $500,000 to $2.5 million in value
(Market = $58 - $134 Billion).
Installment Sales
Installment Sales-Continued
The Buyer assigns the obligation to an Assignment Company to make periodic payments.* An Assignment Company funds the payment liability by purchasing an annuity from Allstate Life (part of the Allstate Corporation, headquartered in Northbrook, IL and a Fortune 100 Company). In the event the Assignment Company fails to make payments, ALIC shall make the scheduled annuity payments to Seller pursuant to the Agreement to Pay.
*See Revenue Rulings 75-457 and 82-122 and Tax Court decisions in Wynne v. Commissioner (47 B.T.A. 731 (1942), nonacq. 1943 C.B.42) and Cunningham v. Commissioner (44 T.C. 103 (1965), acq. 1966-2 C.B. 4) for substituting obligors.
Design Mechanics
Sales agreement between the Buyer and the Seller includes language allowing for installment sale. Terms of an Installment Agreement govern payment schedule. Can be paid period certain or period certain and life. Only restriction on payment streams cannot be life/life contingent only; needs period certain.
Target Market*
Target value range is $500,000 to $50,000,000, or Level 2 through Level 5.
Businesses sold for less than $500,000, or Level 1, and over $50,000,000, or Level 6, are probably not a target market.
*Data obtained from the 2004 Business Ref. Guide.
disposes of the property within 2 years Related persons as defined under IRC 267(b)
Sale of inventory Depreciation Recapture
The portion of the sale that represents amounts previously deducted for depreciation are includible as ordinary income
Sales resulting in a loss Sale of stock or securities traded on an established securities market Sales of personal property by a person who regularly sells or
Reporting Requirements
The Seller is responsible for reporting any applicable Installment Sale income to the Internal Revenue Service and should consult with his or her own independent tax advisor for details.