StructuredSales.org
StructuredSales.org
Tennessee sellers tend to be operators, not trophy-land owners. A Memphis logistics company whose trucks and customer list are the business. A Nashville clinic whose buyer is a health system. A Chattanooga manufacturer whose equipment is depreciated and whose goodwill is not. People who moved from Illinois or California often assume "no income tax" means the closing is a federal-only event. For the individual, the capital gain is federal-only. For an LLC or corporation, Tennessee's excise tax can still read the company's federal income, including gain on an asset sale.
A structured installment sale under IRC §453 times the individual's federal gain against the 0%, 15%, and 20% long-term rates and the 3.8% net investment income tax. It does not, by itself, decide the entity's excise tax, and it does not spread the realty transfer tax that is paid when the deed is recorded.
The Department of Revenue's guidance on withholding says Tennessee has no income tax on earned income and therefore no wage withholding. The Hall tax, which applied to interest and dividends, was repealed for periods beginning January 1, 2021. It was never a tax on capital gains or on wages. Installment interest received in 2026 by a Tennessee resident is ordinary income federally and can be net investment income. It is not Hall-tax income. The Tax Foundation's 2026 profile also lists no estate or inheritance tax, and it describes the 6.5% excise tax as the state's tax on corporate net income.
Franchise and excise tax is imposed on entities that do business in Tennessee and offer limited liability. The Department's rate page states franchise tax at 0.25% of Tennessee net worth and excise tax at 6.5% of Tennessee taxable income. The franchise-tax minimum is $100. A 2024 law change dropped the alternative property measure of the franchise tax; the Department's computation guidance now describes the base as net worth. Excise "net earnings" start from federal taxable income before the net operating loss and special deductions, with Tennessee adjustments. The June 2026 franchise and excise manual says sole proprietors and general partnerships are outside the tax because they do not offer limited liability, and that a business disregarded for federal purposes is not disregarded for these taxes except for a single-member LLC owned by a corporation.
That split is the planning point. An individual who sells stock may have only a federal capital gain. An LLC that sells its assets may owe 6.5% excise tax on the gain inside net earnings, and the owner may also have a federal gain on liquidation or on the K-1, with no second Tennessee personal tax. Which path the buyer demands — stock or assets — changes the Tennessee bill more than the installment schedule does. Have the entity's preparer model excise tax before you promise the seller a "no state tax" result. Allocation of price among goodwill, equipment, and a noncompete is covered in selling a business and, for clinics, in the medical-practice note.
Realty transfer tax is separate and immediate. Tennessee charges 37 cents per $100 of the greater of consideration or value for the privilege of recording an instrument that transfers realty. The grantee generally pays it. On a $1.5 million building that is $5,550 at the register. Section 453 does not defer it. Leases, many trust and divorce transfers, and a list of other instruments are exempt under the statute. A sale to a third-party buyer is the taxable case.
A married couple, both under 65, sells stock they have held for more than a year. Other AGI is $190,000 of wages, treated as outside net investment income. The $32,200 standard deduction leaves taxable income of $157,800 before the gain, which is already above the $98,900 zero-rate threshold in Revenue Procedure 2025-32. The 15% band runs to $613,700 of taxable income. NIIT uses a $250,000 joint MAGI threshold. Long-term gain is $1,400,000, in one year or as $200,000 a year for seven years. The table assumes the gain is on the personal return and that the company is not also paying excise tax on an asset sale. Equipment recapture, if the deal is an asset sale, is year-of-sale ordinary income and is omitted. Ordinary interest on a structured schedule is omitted. Brackets are held flat.
| 2026 federal estimate | Lump sum | Each of 7 years | Seven years combined |
|---|---|---|---|
| Long-term gain recognized | $1,400,000 | $200,000 | $1,400,000 |
| Gain at 15% | $455,900 | $200,000 | $1,400,000 |
| Gain at 20% | $944,100 | $0 | $0 |
| Long-term capital gains tax | $257,205 | $30,000 | $210,000 |
| NIIT at 3.8% | $50,920 | $5,320 | $37,240 |
| Estimated federal tax on this gain | $308,125 | $35,320 | $247,240 |
The difference is about $60,885 of federal tax on these assumptions, before time value, interest, and any excise tax. Taxable income of $157,800 leaves $455,900 of 15% room. The lump sum puts $944,100 in the 20% band. Each installment year reaches $357,800 of taxable income and stays at 15%. Lump-sum NIIT is 3.8% of $1,340,000 (MAGI of $1,590,000 minus $250,000). An installment year has MAGI of $390,000, so NIIT applies to $140,000. Tennessee individual tax is zero in both columns. If the buyer requires an asset sale, put the 6.5% excise tax in a third column before you compare. The calculator does the federal individual sketch.
Mechanically, the buyer can still pay cash at closing. The deferred portion is paid to an assignment company, which funds the seller's payments with an annuity from a rated carrier. Form 6252 reports basis, gain, and interest. A strategic buyer of a trucking company rarely wants a seven-year seller note. The structure lets the buyer pay and lets the seller take the income over time. See how that assignment works and using the stream as retirement income.
A Tennessee license does not re-source an Illinois warehouse or a California rental. Illinois allocates a nonresident's nonbusiness capital gain on real property to Illinois if the property is there, and the regulation treats oil and gas interests in place as real property. Minnesota taxes nonresidents on Minnesota property and business income. California's Publication 1100 taxes installment gain on California real property after the seller leaves, and it can keep the gain on stock that was sold while the seller was a California resident. New York taxes nonresidents on New York real property and on some entity interests that are mostly New York real estate, and it has a statutory-resident test tied to a permanent place of abode and more than 183 days. New Jersey collects an estimated income-tax payment when a nonresident sells New Jersey real property. Oregon taxes a nonresident's gain on Oregon real property even when it is not part of an Oregon business. The guides for Illinois, California, New York, New Jersey, Oregon, and Minnesota are the longer versions. If you are still a resident of one of those states on the day of sale, that state taxes your worldwide income for the resident portion of the year, including gain on a Tennessee asset. A plant or parcel across the line is a different return: Kentucky, Georgia, Alabama, Mississippi, Arkansas, Missouri, North Carolina, and Virginia.
Section 1245 recapture is ordinary income in the year of sale under section 453(i). Unrecaptured section 1250 gain can ride the installment method at a maximum federal rate of 25%. Section 453(e) reaches some related-party resales within two years. Section 453(g) generally denies installment treatment on depreciable property sold to a related person. Section 453A interest can apply above $5 million of installment obligations, with an exception for farm property and personal-use property. A logistics company is not a farm. Pledging the obligation can be treated as a payment. Screen larger deals with the §453A calculator.
No. Tennessee has no individual income tax on wages, and the Hall income tax on interest and dividends was repealed for tax periods beginning January 1, 2021. An individual's long-term capital gain is not taxed by the state. Federal capital gains rates and the 3.8% net investment income tax still apply. The ordinary interest inside installment payments is federal ordinary income, and it is no longer subject to the Hall tax.
They can. Franchise tax is 0.25% of Tennessee net worth, with a $100 minimum. Excise tax is 6.5% of net earnings, which starts from federal taxable income with Tennessee adjustments. The taxes apply to entities that offer limited liability, including many LLCs and corporations. Sole proprietors and general partnerships are not subject to them. An asset sale inside a taxable entity can increase excise tax even though the owner pays no Tennessee tax on a personal capital gain. A sale of stock by an individual shareholder is a different transaction.
No. Tennessee's realty transfer tax is 37 cents per $100 of the greater of consideration or value, generally paid by the grantee when the instrument is recorded. It is a tax on the privilege of recording the transfer. IRC §453 changes when the seller recognizes gain. It does not change the transfer tax.
No. Illinois allocates a nonresident's capital gain on Illinois real property to Illinois, and it treats mineral interests in place as real property. If you are still an Illinois resident when a payment is received, Illinois taxes that income because residents are taxed on all income. California, New York, New Jersey, Oregon, and Minnesota apply their own rules to property and businesses left behind. Domicile is a facts test, not a new driver's license by itself.
Section 1245 recapture, and section 1250 recapture properly so called, is recognized in the year of sale even if other payments are deferred. Unrecaptured section 1250 gain on real property can be reported as installment payments arrive and is taxed at a federal maximum of 25%. The section 453A interest charge can apply when non-farm installment obligations exceed $5 million.
Last reviewed: October 22, 2026. Excise-tax treatment of a specific asset sale depends on federal taxable income and Tennessee adjustments. This page does not compute that return.
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