A monetized installment sale is a special type of installment sale whereby a seller of appreciated assets attempts to defer U.S. Federal income tax liability over a period of years while currently receiving cash or other liquid assets via a monetization transaction, such as a loan.
Notable[citation needed] monetized installment sales that public companies have reported from 1999 to the present have included: These transactions typically are structured with the help of an advisor in connection with the imminent sale of the appreciated asset.
While the monetization component of the transaction had an unusual interest rate, it concluded: Because a monetized installment sale is subject to these standard levels of review, it is important that all components of the transaction (i.e. the installment sale and the subsequent loan) be structured in accordance standard commercial documentation and terms.
While monetized installment sales are used to defer taxable gain while maintaining near liquidity, a related transaction may be employed to achieve other objectives.
For example, a structured sale based on Private Letter Ruling 150850-07[7] is common where the seller wants to defer tax but receive a guaranteed income stream from a high quality payer such as an insurance company or other highly rated financial institution.