Don't Want Another Property? The Structured Sale Math

Short answerA 1031 exchange only defers tax if you buy more real estate. If you are done owning property, a structured installment sale is the closest substitute: the buyer pays cash, you buy nothing, and the gain is taxed as fixed payments arrive. On a $1,800,000 California fourplex below, that cut the tax from $458,523 to $317,020 over 15 years.

Your options when you are done owning property

Most of what sellers hear about deferring tax assumes they will buy again. Brokers and exchange intermediaries are paid when you do. If the reason you are selling is that you want out of tenants, repairs and loans, most of that advice does not apply to you.

Option	Buy another property?	Tax	The catch
Cash sale	No	All in one year	The highest bill, and it cannot be undone
1031 into a Delaware statutory trust	Yes, a passive interest in one	Postponed	No control, hard to sell, sponsor fees, still real estate
Seller-carried note	No	Spread as the buyer pays	You are the bank; buyer default means foreclosure
Structured installment sale	No	Spread as the payments arrive	Fixed schedule, insurer strength, set up before closing
Charitable remainder trust	No	Spread through the trust's payouts	Irrevocable; at least 10% must go to charity (IRC 664(d))
Hold until death	You keep the one you have	Erased by the step-up	You stay a landlord

The Delaware statutory trust route is still a 1031: you buy a share of property someone else manages. It removes the work, not the ownership, and the gain is still waiting at the end. Details on the Delaware statutory trust analysis.

Worked example: a California fourplex

Assumptions (illustration only): a single seller, age 70, living in California. She sells a fourplex for $1,800,000 with a $500,000 adjusted basis, a $1,300,000 gain. Of that, $250,000 is unrecaptured Section 1250 gain. Her pension and IRA income is $60,000 a year. No mortgage, selling costs ignored.

On the 15-year schedule, $120,000 of principal arrives each year from 2027. About 72% of it ($86,667) is gain, because the gain is 72% of the price. The 25% gain is reported first. The interest element is ordinary income and is left out. California taxes capital gains as ordinary income, with no lower rate.

	Cash sale, 2026	Structured, 15 years from 2027
Federal income tax	$265,894	$201,853
3.8% surtax	$44,080	$0
California income tax	$148,549	$115,167
Total tax on the gain	$458,523	$317,020
Per year	All on one return	$26,592 for two years, $25,692 in year three, then $19,845

Tax figures are the added federal income tax (including alternative minimum tax) and 3.8% net investment income tax on the gain, from the Big Sale Tax engine, with 2026 federal law and brackets held flat for every year (IRS Rev. Proc. 2025-32). Future brackets are indexed for inflation, so later years are shown conservatively. California figures use the FTB 2026 schedule built into the engine.

The spread saves $141,503 in this illustration. About $108,121 of it is federal and surtax, because $86,667 of gain a year keeps her under the $200,000 surtax threshold for single filers. The other $33,382 is California, because smaller yearly amounts are taxed in lower state brackets instead of the top ones.

What you trade for the spread

Fixed schedule. Once funded, you cannot speed it up, sell it or borrow against it; a pledge counts as a payment (IRC 453A(d)).
Insurer strength. The payments come from an assignment company funded by a life insurer, so its financial strength matters more than anything else.
A fixed rate. The schedule is priced on funding day. The agent's commission is built into it.
Timing. It must be in the purchase agreement before closing. After the money reaches you, it is too late.

Compare that with carrying the note yourself. The tax math is the same, but you take the buyer's credit and the property back if they stop paying. See two kinds of installment sales and the seller-carried note analysis.

Planning to leave California?

Moving does not take the gain with you. California treats gain from California real property as California-source income, including the gain in installment payments you receive after you become a nonresident (FTB Publication 1031). Interest on the payments follows different rules. A move to a no-tax state cuts the tax on your other income, not on these payments. See California capital gains tax.

Who it fits, and who it does not

Fits: sellers who are done owning property, want predictable income, and do not need the whole price at once. It also fits sellers whose buyer has bank financing or cash, since the buyer pays in full either way.

Does not fit: sellers who may need the money early, sellers who want market returns on the proceeds, and anyone who has already closed. If you might want real estate again later, compare the 1031 exchange vs structured installment sale first.

The 1031 and installment sale series

Frequently asked questions

How do I avoid capital gains tax if I do not want to buy another property?

You cannot avoid it with a sale, but you can spread it. A structured installment sale or a seller-carried note reports the gain as payments arrive, which keeps more of it in lower brackets. A charitable remainder trust also spreads it, with a gift to charity. Holding until death erases it under the step-up.

Can I defer capital gains without a 1031 exchange?

Yes. The installment method of IRC 453 defers tax on each payment until you receive it. A structured installment sale uses it with the buyer paying cash at closing. Opportunity Zone funds and charitable remainder trusts are other routes with their own trade-offs.

Is a structured installment sale the same as seller financing?

The tax treatment is the same, Section 453. The difference is who pays you. With seller financing the buyer owes you. In a structured installment sale the buyer pays in full at closing and an assignment company makes the payments.

What happens to the payments if I die?

The remaining payments go to your beneficiaries on the same schedule. The gain in them is taxed to them as it arrives (IRC 691(a)(4)); there is no step-up on the payment stream.

Does California tax installment payments if I move away?

Yes, for gain on California real property. California treats it as California-source income even after you become a nonresident (FTB Publication 1031).

When do I have to decide?

Before closing. The structured installment sale must be written into the purchase agreement, and programs need the application and schedule ahead of the closing date, often a few weeks.

Sources

Checked October 23, 2026.

Hans Goldstein is an Enrolled Agent, admitted to practice before the Internal Revenue Service. Not affiliated with or endorsed by the IRS. General education, not tax or legal advice for your situation.

Insurance products offered through Goldstein & Co. LLC dba Goldstein Insurance Services, CA license 4273294. If you implement a structured installment sale through that business, Hans is paid a commission by the insurer; it is built into the payout rate. See the disclosures.

Also free: the book Same Sale, Different Tax, the same $1,000,000 gain taxed ten ways. Want it run on your sale? Book a free scope call to see whether the Big Sale Tax Analysis is worth it.

Who you will talk to

Hans Goldstein · Sacramento, California
Hans Goldstein: Tax & Exit Planning, an independent practice. Enrolled Agent, admitted to practice before the Internal Revenue Service. CA Insurance License #4273294, NPN 20602398.

What happens first: You fill in the short form for a free scope call, about 5 minutes. Hans reviews every one personally and replies within 1 business day. If it is a fit, you get a link to book the call.
The scope call: Fifteen minutes, free: price, timeline, what you are selling and what the money is for. Scope means you hear whether the analysis is worth it for your sale.
What you get: A written side-by-side comparison of your cash-sale baseline against every path that fits, year-by-year numbers, a written recommendation, and a review meeting with you and, if you like, your CPA and attorney.
What it costs: The scope call is free. The Big Sale Tax Analysis is $5,000 per household per transaction, only if you decide it is worth it. No retainer, no hourly billing, no obligation to use any strategy.
How Hans is paid: The $5,000 fee pays for analysis only and is not reduced or credited if you buy anything. You are never required to buy anything. No referral fees are paid to or received from brokers, CPAs or attorneys. Hans is also a licensed insurance producer with a separately owned insurance business. That business is not part of this engagement, and the analysis does not recommend insurance products. If you later choose an installment sale funded through an insurance company, that company pays Hans a commission through his separate insurance business. He may be compensated by that business if you use an insurance-funded installment sale. Hans is an Enrolled Agent (EA), admitted to practice before the Internal Revenue Service. He is not a CPA, attorney or registered investment adviser; the analysis models tax effects and does not recommend specific securities. Read the disclosures.

Book a free scope call or call 213-340-2018. Hans answers or calls back the same business day.

Selling without buying another property: the structured installment sale