Tax Management- Selling property to buy business

searcher profile

May 06, 2025

by a searcher from University of Washington in Redmond, WA, USA

I am selling a property to raise capital to fund future acquisitions. Through my research, i came across a tax-efficient structure to execute this. 1. Start a C Corporation and move the property as an asset under the C corp. This is considered as a taxable event. Structure this as an installment sale so that you can spread the payments from the C Corp to you personally over few years. 2. C Corp to sell the property and raise cash. 3. Leverage the cash to buy a business. 4. Use the proceeds of the business to continue paying the installment to you from C Corp. As I am getting paid in installments, I continue to pay the capital gains tax based on my tax bracket that year. I understand there are a few caveats to this. Has anybody done this?. Any recommendations on tax consultants or attorneys who can help structure this right.
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commentor profile
Reply by a professional
from Harvard University in Lynbrook, NY 11563, USA
Don't think this works. See Code Section 453(e), providing that upon disposition by a related person after an installment sale to a related person, the proceeds received by a related person are treated as received by the original seller. If you own most of the corp, I think you're a related person to the corp (see Section 318, which is cross-referenced). If this did work, anyone can manufacture an installment sale, so usually workarounds like this will be blocked by law (though not always). If you could bring in other shareholders into the corp to make yourself not a related person, then you may be able to do this, but it would need to make sense for those people to put money into a C corp for future use (e.g., a Berkshire-style holding company). Talk to a tax advisor for a definitive answer.
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Reply by a professional
from American University in Irvine, CA, USA
Luke, thanks for the tag. Hi, Sreenath. I am not a tax expert, but having been handling complex corporate transactions for over 30 years, I've seen a lot of things. One constant is that tax treatment is very specific to the taxpayer, and so I would have this vetted by an expert in tax law, who can run the numbers for you, including optional scenarios, so that you are as "optimized" as possible. I don't have anyone to refer in Washington State right now, but if you need help finding someone, DM me and I would be happy to reach out to my network to see if anyone else does.
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