Monetized Installment Sale

Case Study

Tax-Deferred Sale

of Insurance Agency

The Problem

The owner of an independent insurance agency contacted us to ask about deferring capital gains tax on the sale of his insurance agency.

He had found a buyer for the assets of his agency (another, younger agent) and had negotiated a purchase contract.

His CPA had informed him that the assets being sold (chiefly the existing book of business, or customer list) would be subject to capital gains tax. The seller learned of us from his CPA and called to inquire about whether we could help.

Facts and Circumstances

Sale price: $1,250,000

Cost Basis: $46,000

Gain on Sale: $1,204,000

Long-Term Capital Gains Tax + NIIT (CA - 37%): $445,480

Proposed Solution

We suggested a monetized installment sale of the intellectual property, because this would allow the owner to avoid immediate capital gains tax. The tax would instead be deferred for 30 years.

A summary of our suggested solution is as follows:

  1. Seller already had a buyer lined up and had negotiated a purchase agreement.

  2. We would introduce the seller to a dealer who would buy the assets using an installment sale agreement. The terms would include interest-only payments for 30 years and a final balloon payment of principal. After 30 years, when the last payment is received (representing the sales price) the capital gains tax will become due.

  3. Immediately upon closing the installment sale transaction, the dealer resells the assets, for cash,  to the originally intended buyer, retaining all the terms and conditions as have been negotiated between buyer and seller.

  4. Concurrently with the installment sale, we introduce the seller to a private lender who is ready to loan to the seller an amount of cash equivalent to 93.5% of the net sales proceeds. The loan terms closely match those of the dealer’s installment sale contract: interest-only payments for 30 years and a final balloon payment of principal.

  5. All payments from the dealer are used to make the seller’s payments to the lender, so that they dealer and lender payments are equal and offsetting.

  6. The loan agreement includes a clause stating that that if the dealer ceases making payments to the seller, then the seller is not required to make payments to the lender.


The seller opted to avoid capital gains tax on sale of the insurance agency (at time of sale), using a monetized installment sale to defer the gain, and the tax.

The seller deferred capital gains tax of $445,480 and received cash at closing of $1,168,750, or 93.5% of the net sales proceeds. This is $364,230 more cash than would have been received under a conventional sale.  


The former insurance agency owner, now retired, can invest those additional funds without limitation instead of paying them in tax in the year of sale.

How to Defer Capital Gains Tax for 30 Years


Simultaneously Obtain Cash

Equal to 93.5% of Your Net Sales Proceeds

(2:20 video)

Learn More


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