Monetized Installment Sale

Classification A, no legitimate version. There is no compliant way to do this as it is marketed.

Sold as: "M453", "monetized installment sale", "sell now defer 30 years", "get 93.5 percent of your money at closing and pay no tax"

If you walked away from closing with 93.5 percent of the money, you were paid. Calling the payment a loan does not change that, and the loan terminates on the same day the note does.

The pitch

Sell the asset, walk away from closing with 93.5 percent of the money as a nonrecourse loan, and defer the gain for 30 years under Sec. 453.

What it costs you if it is wrong

The deferral fails and the gain is taxable in the year of the sale, with interest running from then. The proposed listed-transaction regulation was never finalized, so there is no Form 8886 requirement and no Sec. 6707A here, and that changes nothing about the substantive attack.

Red flags

You have the money and the paperwork calls it a loan
The note is with an intermediary rather than the actual buyer
The loan and the note run the same term and end together
Title passes straight from you to the buyer
Nobody computed Sec. 453A interest

Questions to ask the person selling this

1Will I have the money at closing? If so, why is that not a payment?
2Who holds my note: the actual buyer, or an intermediary?
3Do the note and the loan run the same term and terminate together?
4Does the intermediary ever take title?
5Who computes Sec. 453A interest?
6What has the IRS said about this structure?

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