IRS Proposes Disclosure of Monetized Installment Sales

Tax attorney Joshua Odintz was cited in a Bloomberg Tax article summarizing the IRS' proposal to classify certain installment sales as listed transactions. Under the proposed regulations, monetized installment sales of real property would be classified as listed transactions, meaning participants would have to report them to the IRS or face penalties. The agency said the rules target transactions in which sales of appreciated property are being structured as sham installment transactions to provide tax advantages to sellers.

The proposal comes a year after the Mann Construction v. U.S. federal appellate decision in which the court determined the IRS had violated the Administrative Procedure Act by classifying transactions as listed transactions without proper notice and comment. The agency has stated that while it disagrees with the Mann ruling, it is nevertheless issuing the proposed regulations to ensure consistent enforcement. Mr. Odintz commented that the rules will "provide certainty for all parties" about the reporting obligations for monetized investment sales and the potential penalties that could apply. Going through the notice and comment period will also give stakeholders a chance to influence what transactions will be subject to the reporting requirements.

"That will help the IRS focus on the transactions that are of greatest concern," he added.

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