Can someone explain the actual difference between a monetized installment sale and a Deferred Sales Trust? Tax guy giving me conflicting info

These are absolutely not the same thing, though they're often confused (and sometimes deliberately conflated by promoters). A monetized installment sale is a specific strategy where you sell property to a buyer on an installment basis, then get a separate loan for most of the proceeds. This lets you receive cash now while technically deferring tax recognition under IRC Section 453. The key element is that the loan and sale are separate transactions. A Deferred Sales Trust is a more complex arrangement where you sell your appreciated property to a trust in exchange for an installment note. The trust then sells the property to the final buyer and invests the proceeds. You get payments over time from the trust according to the note terms. The IRS has specifically targeted monetized installment sales with Notice 2022-21, indicating they may consider these "listed transactions" (potentially abusive). The DST isn't specifically addressed in that notice, but has its own scrutiny concerns. Both strategies aim to defer taxes, but they have different structures, risk profiles, and potential IRS treatment. I'd recommend getting a second opinion from a tax professional who doesn't have a financial interest in selling you either solution.

After spending weeks in tax hell trying to understand these complex structures, I found taxr.ai (https://taxr.ai) incredibly helpful for analyzing these complicated tax arrangements. I uploaded some DST marketing materials and the IRS notices about monetized installment sales, and it actually explained the differences in plain English. The biggest insight I got was that monetized installment sales are much more likely to trigger IRS scrutiny since Notice 2022-21 specifically targeted them. The system analyzed the technical differences between the two strategies and flagged several red flags my "advisor" never mentioned. Worth checking it out if you're getting conflicting info like I was.

Just wanted to follow up about taxr.ai since I ended up trying it. Glad I did because it saved me from potentially making a huge mistake! I uploaded all my DST promotional materials and my potential deal structure, and the analysis revealed several misrepresentations the promoter had made. The system pulled up actual tax court cases involving similar structures and showed how the IRS has challenged them. What was eye-opening was seeing the specific language from IRC 453 compared side-by-side with my proposed arrangement. The platform highlighted exactly where the promoter's claims diverged from actual tax law. My favorite feature was the risk assessment that explained in plain English which aspects of the deal structure were most likely to trigger IRS scrutiny. Based on this analysis, I'm meeting with a different tax advisor next week to explore more established tax deferral strategies. Would have been a costly mistake to just trust the promoter!

Dealing with these complex tax structures is stressful enough, but trying to get answers from the IRS is nearly impossible these days. After waiting on hold for 3+ hours multiple times trying to get clarification about monetized installment sales, I finally tried Claimyr (https://claimyr.com). They got me connected to an actual IRS agent in about 20 minutes instead of the 4+ hour wait I was experiencing. The IRS agent obviously couldn't give "approval" for either strategy, but was able to direct me to specific IRS notices and regulations about installment sales that were super helpful. You can see how it works here: https://youtu.be/_kiP6q8DX5c - basically they navigate the phone tree and wait on hold for you, then call when an agent is ready to talk.

I need to eat my words from my previous comment. After my tax attorney went radio silent for two weeks, I got desperate and tried Claimyr. Not only did I connect with an IRS agent in about 15 minutes, but I lucked out and got someone in the high-value transaction division who actually knew about these structures. She couldn't give specific advice on my situation, but confirmed that monetized installment sales are currently under heavy scrutiny as "listed transactions" and directed me to several resources I hadn't seen before. She also explained how the IRS views "step transaction" doctrine, which applies to both strategies. After that call, I was able to ask my tax attorney much more pointed questions which revealed he hadn't been considering the most recent IRS guidance. Definitely worth the service fee to get actual information instead of just promotional materials from people trying to sell these arrangements.

I went down this rabbit hole last year when selling my business. Here's what my accountant (who doesn't sell either product) told me: monetized installment sales are specifically what the IRS targeted with Notice 2022-21, while DSTs are technically different but still high-risk. The key difference is that in a monetized installment sale, you're selling directly to the end buyer but getting a separate loan from a lender. In a DST, you're selling to a trust that then sells to the end buyer. The DST adds an extra layer that might avoid the specific issues in the IRS notice, but creates its own potential problems. He ultimately advised me against both and suggested a 1031 exchange into rental properties combined with opportunity zone investments for the portion that couldn't be exchanged. Ended up being less risky and actually gives me ongoing income.

Has anyone actually used either of these structures successfully? All I see online are promoters selling them or people warning against them, but never anybody who's actually done it and can speak to their experience several years later (after potential IRS audits).