top of page

Legal Authority

for Installment Sales from A Value Added Dealer 

Establishing More Economic Substance than Existed in Public Companies' Transactions

(Click for Documents)

  1. Summary of Options  - Comparison of Liquidity Options into Seller's entity - Unsecured Loan or unsecured,  Preferred Equity.  Decision as to which is based on final discussions with seller.
     

  2. IRS Interpretation of Newly Codified Economic Substance Doctrine - Economic substance sometimes is required.  When it applies, a transaction must i) change, in a meaningful way, the taxpayer’s economic position, AND ii)  the taxpayer must have a substantial purpose (apart from Federal income tax effects) for entering into the transaction.
     

  3. When Economic Substance is Required - The IRS has stated that they will not provide guidance as to when a transaction must have economic substance and that taxpayers should refer to prior rulings and case law in making a determination.  This summarizes when such is required.
     

  4. Value Added Services - A list of services that Liquid Capital provides at no additional charge as part of their 'value added dealer' services and which are not available elsewhere and provide significant economic substance.  (Over $100,000 per year and millions of dollars in economic value over the contract period). 

​

Sample Cases

Sellers Are Already Selling Their Asset “There is a material difference between structuring a transaction in a particular way to provide a tax benefit (which is legitimate), and creating a transaction without a business purpose, in order to create a tax benefit (which is illegitimate). Coltec, 454 F.3d at 1357.
“A taxpayer’s subjective intent to avoid taxes . . . will not by itself determine whether there is a business purpose for the transaction.” IES, 253 F.3d at 355.
“[I]t is also well established that where a transaction objectively affects the taxpayer’s net economic position, legal relations, or non-tax business interests, it will not be disregarded merely because it was motivated by tax considerations.” ACM, 157 F.3d at 248 n.31.

Public Companies' Installment Sale Transaction - Background

​

(Click for Documents)

  1. Executive Summary - Overview of Monetized Installment Sales
     

  2. IRS - Private Letter Ruling 20123401f allowing a Monetized Installment Sale.  IRS does not discuss need for economic substance.  Transaction is 'prearranged' and is part of a 'promoted transaction.'
     

  3. SEC - Summary of 10 Public Companies Utilizing Monetized Installment Sales
     

  4. Federal Bankruptcy Court - Approval of Monetized Installment Sale of California beach home (with notice to IRS)
     

  5. American Bar Association Meeting  - Discussing Installment Sales (favorably for Monetized Installment Sales and Unfavorably about Deferred Sales Trusts), with IRS officials present, 2016 (audio file)
     

  6. Law Review Article - Monetizing Installment Sale Transactions, Corporate Taxation (WG&L), Nov/Dec 2004
     

  7. Law Summary - Judicial doctrines pertaining to tax related transactions, including business purpose, step transaction doctrine, assignment of income, etc.

​

CONTACT

Us

Email Us

Tel:  (408) 657-3760

For any general inquiries, please fill in the following contact form:

Thank You For Your Message

bottom of page