Monetized installment sale

Defer the TAX and keep your CASH!

Sell your high-value asset, obtain cash equal to 93.5% of the sales proceeds,

and defer your capital gains tax for up to 30 years.  

Let us use our years of experience to help you keep your money.

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1031 Exchange Alternative

Here is Your 1031 Exchange Backup Plan that Defers Capital Gains Tax and Delivers Cash at Closing

Deferred Sales Trust Alternative

Considering a Deferred Sales Trust?​ Did you know you can obtain cash when you sell while deferring your capital gain for 30 years?

Legal Basis

At least three federal agencies have reviewed and allowed for the use of Monetized Installment Sales transactions: The IRS, The SEC, US Bankruptcy Court

Types of Qualifying Assets

Monetized installment sales may be used for tax-deferred sales of businesses, real estate, agricultural property, fine art, mineral rights, intellectual property, and virtually any highly appreciated asset other than publicly-traded securities. Other applications include buyout of partnership interests, resolution of bankruptcy cases and rescue of failing 1031 exchanges. 

Commercial Real Estate

Multi- Family Real Estate

Agricultural Property

Business

More Information

Sellers can benefit from monetized installment sales whenever they are faced with capital gains tax in amounts significantly greater than 6.5% of their net sales proceeds. The cost of the transaction to a seller includes 1.5% in loan-related costs and a 5% reduction in the final balloon payment received from the dealer upon satisfaction of the installment sale promissory note at the end of 30 years. 

Against this total cost of 6.5% of the net sales proceeds, a seller gains the advantage of being able to freely invest – for 30 years – an amount equivalent to the capital gains tax that otherwise would have been due up front. The time value of money works for the seller, enabling them to capture a financial benefit equivalent to the net present value of the investment income received during that period.

The seller, as a borrower on the monetization loan, is required to make payments to the monetization lender only to the extent they have received payments from the dealer. The lender does not receive a lien on the installment contract, on the asset that was sold, on the installment payments made by the dealer, or on the investments made by the seller/borrower. The lender does not require that the seller/borrower provide any security, because the lender relies only upon the dealer’s investment income and payments to the seller as the source of funds for the seller/borrower to repay the loan. The lender does not require that the dealer 

Monetized installment sales have been utilized by public companies for at least twenty years, with the approval of their boards, auditors and the SEC. A US Bankruptcy Court in California ordered use of a monetized installment sale in 2014 to help settle a case in which sale of real estate could produce cash. 

Guidance from the IRS regarding monetized installment sales may be found in an IRS General Counsel Memorandum published in 2012, which reviewed and approved a monetized installment sale in a form that serves as the model for present-day monetized installment sales. 

A monetized installment sale offers advantages to sellers who are considering other tax deferral strategies: 

• Compared to an installment sale by itself, the monetized installment sale reduces risks related to default, prepayment and interest rate fluctuations, and provides nearly full liquidity; 

• Compared to a deferred sales trust, a monetized installment sale features lower overall costs, less ongoing structure and compliance burden, and vastly greater freedom to use the sales proceeds as desired, without third-party oversight; 

• Unlike a 1031 exchange, real estate sellers can dispose of one real estate investment and buy a replacement property without any risk of losing tax deferral on their relinquished property resulting from potential failure to meet exchange deadlines. 

Examples of Monetized Installment Sales

Professional real estate investor underestimated the time to find a replacement property in a 1031 exchange. Bailed out before the deadline by converting to a Monetized Installment Sale, avoiding a disastrous capital gain and obtaining cash she used to shop for another property at her leisure.

Example 2

A doctor sells his practice for $2,450,000, a gain of roughly $1.4 million, which would have cost him about $500,000 in capital gains tax. 100% of gain was deferred. He nets $2.29 million in cash at closing.

Keep the money you worked hard for