monetized installment sale

[Mike Dymski]

I am considering a monetized installment sale and would be grateful to connect with anyone who has done one before.  This is a difficult transaction to get comfortable with and not a widely known strategy.

For those not familiar with it (including me), it is an alternative to the 1031 exchange and other tax planning strategies to defer the gain and depreciation recapture on the sale of a property or a business for 30 years (including a personal residence).  It involves selling the property to an intermediary/dealer under a 30 year interest only installment contract and the dealer sells the property to the normal buyer (seamless to the buyer).  The seller (me) monetizes that installment contract by getting a 30 year fixed rate interest only loan.  The interest payments on the installment contract and the loan are identical to one another and are administered by an escrow agent.  The loan proceeds are 93.5% of the installment sales proceeds (1.5% fee to the lender and 5% discount to the dealer).  Technically, the 5% discount does not occur until the dealer pays the principal on the loan in 30 years but the seller is short the 5% at inception.

I can't get comfortable with this transaction without help from some people who are not getting compensated from it and would love to hear from others who have done it (or researched it and shot it down).

[Christopher Smith]

I've never done one, but you might be well advised to know the government has an interest in closely scrutinizing these intermediary (midco) transactions under a number of different anti abuse regimes that come complete with onerous penalties and other sanctions. I obviously have not considered your specific fact pattern so I won't comment upon it, but care is generally warranted with these types of fabricated transactional vehicles.