The 537 Installment Sale Trust
A proven, IRS-compliant trust structure rooted in IRC Section 453 that allows sellers of appreciated assets to defer capital gains taxes through installment payments.
The Legal Foundation
The installment sale method has been part of the Internal Revenue Code since 1928. IRC Section 453 allows taxpayers to defer the recognition of capital gains when the proceeds from a sale are received in installments over time rather than as a lump sum.
The 537 Installment Sale Trust applies this established tax code provision through a structured trust arrangement. An independent trustee purchases the appreciated asset from the seller in exchange for an installment note, then resells the asset to the end buyer. The seller recognizes gain only as principal payments are received under the installment note — spreading the capital gains tax liability over the term of the note.
This is not a loophole, a workaround, or an aggressive tax strategy. It is a direct application of a tax code provision that Congress has maintained for nearly a century.
How the Trust Is Structured
Independent Trustee
The trust is managed by a qualified, independent trustee — typically an attorney or CPA — who has no prior relationship with the seller. This independence is a critical compliance requirement.
Bona Fide Sale
The sale to the trust is a genuine transaction at fair market value, supported by independent appraisals. The seller receives an installment note with defined payment terms, interest rate, and duration.
No Loans From the Trust
IST Admin Services does not permit loans from the trust to the seller. This is one of the most important compliance safeguards — structures that allow trust loans have drawn IRS scrutiny.
Full Documentation
Every engagement includes a trust agreement, installment note, independent legal opinion, and all supporting compliance documentation. This creates a complete record in the event of an IRS review.
What Assets Qualify?
The 537 IST works with virtually any appreciated capital asset, including:
Tax Treatment
Under the installment method, each payment you receive consists of three components:
By spreading the gain recognition over 15–30 years, many sellers remain in lower tax brackets each year and avoid triggering the 3.8% Net Investment Income Tax (NIIT) that applies to high-income taxpayers.
Calculate Your Tax Savings
See how much you could save with a 537 Installment Sale Trust using our free calculator, or speak with our team directly.