Monetized installment sales: the deferral pitch the IRS has been watching
The honest short answer
The pitch: sell your appreciated business or real estate, get nearly all the cash immediately through a "monetization" loan, but defer the capital gains tax for years or decades under installment-sale rules, as if you'd only received a small down payment. A genuine installment sale under §453 — where the seller actually carries a note and receives payments over time — is completely legitimate. The "monetized" version, where a seller nominally reports a deferred sale while a related intermediary immediately hands them 90%+ of the value as a "loan," is exactly the kind of structure the IRS has flagged as a transaction of interest and has been actively scrutinizing. If you're getting nearly all your money now, tax deferral premised on not having received it should raise real questions.
What's legitimately true in the pitch
- Ordinary installment sales are real and common — a seller who genuinely carries a note and collects principal and interest over years defers gain recognition to when payments are actually received.
- Deferring a large gain has genuine value when the deferral is real: time value of money, potential future rate changes, and the ability to spread income across years.
- Legitimate intermediary and escrow structures exist in real estate and business sales generally, separate from the aggressive monetized version being scrutinized.
Where the pitches mislead
- "You get the cash now, but it's a loan, not income" is the entire structure the IRS is questioning. If the "lender" is a related party to the buyer or the promoter, and the loan terms are designed to functionally hand you sale proceeds, substance-over-form doctrine is squarely in play.
- Promoter fees are often substantial — a meaningful percentage of the transaction — for a structure whose primary selling point is a tax position the IRS has publicly challenged.
- "Everyone's doing it" isn't a defense. Being a listed transaction of interest means the IRS requires disclosure and can assess penalties on both the taxpayer and the promoter, regardless of how common the marketing makes it sound.
- Deferred sales trusts marketed as CRT alternatives carry similar scrutiny when structured to avoid a genuine charitable component while promising CRT-like deferral.
The math the pitch never runs
Compare a genuine installment sale — where you actually wait for the payments — against a monetized version where you get the cash immediately but the "loan" is functionally the sale proceeds. If the answer to "what would happen to my tax position if this were audited and recharacterized as a sale in the year I received the cash" is "a large tax bill plus interest and penalties, potentially plus promoter-related exposure," the deferral being sold isn't worth the risk for most sellers. Ask what percentage of sellers who used a comparable structure have been audited, and what happened.
Questions to ask before signing
- Am I actually not receiving the sale proceeds, or am I receiving a "loan" that functions identically to receiving them?
- Is the lender or intermediary independent, or related to the buyer, seller, or promoter in a way that undermines the loan's substance?
- Has the IRS specifically flagged this structure, and what disclosure obligations does that create for me?
- What does a genuine, IRS-respected installment sale look like for my situation instead?
Selling a business or investment property and want real deferral options?
We'll lay out the legitimate installment sale, 1031, and trust structures that actually hold up before you consider anything flagged by the IRS.
Book a free consultationThis review discusses a category of tax marketing generally, not any specific company or offering, and is not investment, legal, or tax advice for any particular situation.