How will the income from the annuity payments be taxed?
All income received from the Structured Sale annuity is taxed as installment sale income. Since capital gains taxes are not paid until the time income is received, you are given a chance to earn a return on the money before it is taxed. Each installment payment has three parts: capital gain, return of cost basis, and interest. The capital gain portion is taxed at the capital gains rate, the interest income is taxed at the normal income tax rate, and the cost basis is returned without any tax.
