Structured Sale
A structured sale — also called an installment sale — lets you exit a concentrated position over multiple years rather than all at once. Instead of recognizing the full capital gain in a single tax year, gain is spread across the installment period, keeping each year's income in a lower bracket and reducing the total effective tax rate on the exit.
The bracket compression problem
Selling a large concentrated position in a single year creates bracket compression: the entire gain lands on top of your other income — salary, bonus, RSU vesting — and gets taxed at the highest marginal rates. In California, that means a combined rate approaching 37–39% on long-term capital gains for high earners, and 47–52% on short-term gains or recently-vested RSU shares.
If instead you spread the same total gain across four or five tax years, each year's incremental gain may fall in a lower bracket — especially if other income is reduced (sabbatical, career transition, a year without RSU vesting). The total tax bill on the same economic exit can be meaningfully lower.
How installment sales work under IRC §453
Under IRC §453, if you sell property and receive payments in more than one tax year, you can report the gain as each payment is received rather than all in the year of the sale. The gain in each year equals the gross profit percentage (gain divided by contract price) times the payment received that year. Interest on the installment obligation is taxed as ordinary income in the year received.
In the concentrated stock context, this typically involves selling the position to a structured product counterparty (often a financial institution) in exchange for a series of future payments. You receive an installment contract rather than cash. The institution hedges the stock position; you receive scheduled payments over the agreed term.
Structured products vs. direct installment sales
A direct installment sale — selling directly to a buyer who pays over time — is straightforward but requires finding a buyer willing to accept installment terms. For publicly traded stock, this is uncommon. More typical in the tech equity context is a structured installment sale product offered by banks and specialty firms, which provide the buyer counterparty and handle the mechanics while you receive the installment stream.
These products have costs — the institution earns a spread — and they introduce counterparty risk. Evaluating the economics means comparing the net after-spread, after-tax cash flow to the alternative of selling immediately and reinvesting the after-tax proceeds.
When a structured sale is the right tool
This strategy works best when: the position is large enough that an immediate sale would materially compress your bracket; you can project meaningfully lower income in future years (sabbatical, semi-retirement, career change); you're comfortable receiving payments over time rather than a lump sum; and the embedded gain is long-term capital gain rather than ordinary income. Structured sales offer less deferral benefit when the gain is short-term (taxed as ordinary income anyway) and when future income is expected to remain high throughout the installment period.
How a structured sale is executed
Model the tax impact across scenarios
We project your income across the installment years — with and without the structured sale — to quantify the bracket benefit and confirm it outweighs the product cost and counterparty spread.
Select a structured product counterparty
For publicly traded stock, we identify financial institutions offering installment sale structures on your specific security. Terms vary — length, payment schedule, spread, and counterparty creditworthiness all factor in.
Execute the sale and receive installment contract
The stock is transferred to the counterparty. You receive an installment obligation — a legal contract committing to a series of future payments. No lump-sum cash at close; payments begin on the agreed schedule.
Report gain as payments are received
Each year, you report your proportional share of the gain on the payments received that year. Your CPA handles the Form 6252 installment sale reporting. This continues until the contract is paid in full.
Find out if spreading the gain over time makes sense for your position.
We model the installment sale economics against your projected income before recommending it.
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