How can structuring payment through an installment purchase agreement benefit me?
One benefit to you from the county’s use of installment purchase agreements (IPAs) is that the interest paid to you over the life of the IPA is not, under current law, subject to federal or New Jersey state income taxation.

The pretax nature of the IPA investment and the tax-free nature of the interest payments could ultimately yield a higher after-tax return to the seller than an investment with a higher interest rate without these tax advantages. If the sale qualifies for installment sale tax treatment, the interest payments you receive are based on pretax principal dollars.

Section 453 of the Internal Revenue Code provides that capital gain from an installment sale may, under the installment method, be deferred until receipt of the purchase price. If you are interested in investigating installment reporting of gain from your sale of the easement, you should consult with an attorney and an accountant who are experienced with installment real estate sales transactions and knowledgeable about the specific federal laws and regulations that apply to this payment method for the sale of your easement.

Since individual circumstances vary, the county is not in a position to guarantee that the IRS would approve this method of reporting gain from sale of any particular seller’s easement.

Show All Answers

1. What is an installment purchase agreement (IPA)?
2. How does the sale of my easement change with an installment purchase agreement?
3. Why is the county using installment purchase agreements for easement purchases?
4. How can structuring payment through an installment purchase agreement benefit me?
5. Why is payment being deferred as late as 2036?
6. What is the interest rate that I will earn under the installment purchase agreement?
7. If payment for my easement is deferred, does this mean that the easement will not be effective until 2036?
8. What happens if I sell the property before 2036?
9. Can I sell or transfer the installment purchase agreement?
10. If my property increases in value between the time that I sign the easement and the year 2036, will the county pay me more for my easement?
11. What happens if I am willing to sell but only want to sell for a cash payment?
12. Will structuring payment of the purchase price through the installment purchase agreement cost me money?
13. Can I use the county's advisers to assist me in selling my easement to the county with an installment purchase agreement?
14. How do I know that the county will have enough money to pay me in the year 2036, and what happens if the county (or its paying agent) fails to make an interest payment to me?
15. How can I find out more about installment purchase agreements?