Most business owners don't realize how much of their exit will go to taxes until it's too late
When you sell a business you built from the ground up, your cost basis is often minimal compared to the sale price. That means nearly the entire proceeds are classified as capital gain. Add depreciation recapture on equipment, goodwill allocation, and state taxes, and the combined tax rate on a business sale can reach 30-40% of the total sale price.
For a $5M business sale, that means writing a check for $1.5M-$2M to the IRS on closing day. The 537 Installment Sale Trust eliminates this entirely. The full pre-tax amount is invested through the Model Q portfolio, and you receive quarterly income from the complete $5M — not the $3M-$3.5M you would have had after taxes.
The difference in lifetime income is substantial: 7% on $5M ($350,000/year) versus 7% on $3.25M ($227,500/year). That's an additional $122,500 per year in income — every year, for the rest of your life — simply because the tax dollars stayed invested.
Traditional Sale
537 IST Sale
Four steps from business sale to tax-deferred passive income
Set up the 537 IST in 14-30 days before your business sale closes. The trust is structured to receive your business assets or equity interests.
Your business interests are transferred to the IST in exchange for a secured promissory note. No tax is triggered at this stage.
The IST sells to the ultimate buyer at the negotiated price. Full pre-tax proceeds are invested through the Model Q dual-asset strategy.
Receive 7% annual income paid quarterly. Taxes remain deferred until you take principal distributions. Note can be refinanced at maturity.
How one business owner kept an additional $1.5M+ by planning their exit through a 537 IST
A 62-year-old founder of a specialty manufacturing company with 45 employees. Started the business 25 years ago with $50,000 in personal savings. A strategic acquirer offered $5M for the company. The founder was ready to retire but dreaded the tax consequences.
With a cost basis of essentially $50,000, nearly the entire $5M was taxable gain. Between federal capital gains (20%), NIIT (3.8%), depreciation recapture on equipment (25% rate), and state taxes, the combined tax bill exceeded $1.5M.
By establishing a 537 IST before the acquisition closed, the full $5M was invested through the Model Q portfolio. The founder now receives approximately $350,000 per year in quarterly income — $105,000 more per year than if he had paid the $1.5M in taxes and invested the remaining $3.5M.
The founder replaced his working income with passive portfolio income, eliminated 60-hour work weeks, and preserved the full value of his life's work. The promissory note qualifies for a step-up in basis at death, meaning his children will inherit the note with zero deferred tax liability.
The full sale price is invested through Model Q. No 30-40% haircut at closing. The tax dollars compound alongside your principal.
Convert active business income into 7% passive quarterly payments. No employees, no overhead, no 60-hour weeks.
Works with private equity acquisitions, management buyouts, strategic sales, and partner buyouts. Accommodates earn-outs and holdbacks.
The promissory note receives a step-up in basis at death, eliminating all deferred taxes. Your children inherit tax-free.
Sell the equity, defer the taxes, and stay on as a consultant or employee if you choose. The IST covers capital gains, not employment.
Access funds within 3-7 business days. No lock-up periods, no surrender charges. Take partial distributions as needed.