Monetized Installment Plans?

33 Replies

Hi Gary - did you get the answer you were looking for?  I know about the monetized installment plans very well and can answer any questions you have.  I will use the monetized plan when I sell my rental property in Santa Clara.

Hi, i plan to do an MIS. What happens if the seller dies before the 30 yrs are up?

At the 30yr date, are the taxes calculated on the total 93.5? Are any of the original exemptions still available? Thank you.

Originally posted by @Senthil Akasham :

@Gary F. , I recently sold a highly appreciated rental property in the Bay Area (CA) last year using the Monetized Installment Sale approach. This deal structure let me get cash at closing and defer the capital gains and depreciation recapture for 30 years. This gives me flexibility in choosing "where" to invest, and not stuck with another real estate purchase in a red hot market (which is what a 1031 will force you to do).

 I’ve been looking at this type of plan on and off for the last year or so, but my CPA is very leery of it, I have a couple of properties that I own one of which I already 1031 exchanged into, and I have substantial capital gains tax Liability when I sell these two small apartment buildings.

 Liability when I sell these two small apartment buildings.

I’ve been doing some research and I’m very interested in the fact that you actually pulled the trigger, can you please tell me a little more? Thank you very much Joel 

Originally posted by @Tyler Kastelberg :

@Gary F.

Gary: You'd net ~93.5% of your net sale price (after realtor fees). The 6.5% that you forgo includes legal costs to execute the monetized installment sale and transaction fees.

My 2 cents:

 I’m really curious as to how main stream or excepted this process is by the IRS, is it fairly cut and dry, my CPA does not seem too familiar with it.

If someone has large capital gains tax upon sale and it’s worth it, you believe this is a very good and legal option according to the IRS?

@Senthil Akasham - regarding your MIS transaction, how did you find the Dealer and Lender? Currently, I am in a situation similar to yours a year ago, and looking for a way to defer capital gain tax. My RE Broker introduced me to MIS method and connected me to a Dealer.

I asked the Dealer for a sample of (1) Assignment Agreement between Dealer and Seller [me], (2) Installment Sale and Purchase Agreement between Dealer and Seller allowing Dealer to sell the property to a Third-Party [Buyer], and (3) Loan Agreement and Promissory Note between Lender and Seller. 

But the language in those Agreements doesn't secure me that Lender would not pursue default against me in the event of third-party default [default by Dealer]. 

I would love using the MIS method, but I need to find a Dealer (and Lender) who would agree by contract the only recourse the Lender would have in the event of default is exclusively against the Dealer, and not Seller.


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