IRS Identifies Monetized Installment Sales As A Listed Transaction

On August 4, 2023, the IRS published proposed regulations that, if finalized, would identify monetized installment sale transactions as a listed transaction. Sellers, intermediaries and other involved parties would be required to report such transactions to the IRS. These proposed regulations come nearly two years after the IRS for the first time placed monetized installment sale transactions on its annual "Dirty Dozen" list, which identifies tax transactions that it has declared as abusive.

The mechanisms of a monetized installment sale can be broken down into five steps.

1. Seller identifies a potential buyer willing to purchase the subject property (sometimes an operating business) with cash;