How and when do I pay taxes on a secondary market structured settlement payment stream in the future that I have purchased? In July 2011, I purchased (through a financial firm/factoring company) a piece of someone else's structured settlement payments. I will get 168 monthly payments of $1,680.32 from years 2027 through 2041. My cost for this was $42,951 and the total of all payments I will receive (including my cost) is $282,294. What kind of income is this considered for tax reporting? When do I start paying tax on the income and do I need to start paying now as the future value is accruing even though I won't receive any payments until 2027? Or, do I pay taxes on the accrued value up to first payment time in the first year I start to receive payments or can I more evenly distribute the accrued valued before the payment stream starts into the payment stream years themselves? Please cite the IRS publication.