The formula to calculate the Monetized Installment Sale (MIS) is:
\[ MIS = \frac{SP - CB}{N} \]
Where:
A monetized installment sale is a financial arrangement where the seller of an asset receives the sale proceeds over a period of time in installments, rather than in a lump sum. This type of sale can provide tax benefits by spreading the income over multiple years, potentially lowering the seller’s tax liability in any given year. The seller typically receives a loan that is secured by the installment payments, allowing them to access the sale proceeds immediately while deferring the tax liability.
Let's say the sale price (SP) is $500,000, the cost basis (CB) is $300,000, and the number of installments (N) is 10. Using the formula:
\[ MIS = \frac{500,000 - 300,000}{10} = 20,000 \]
So, the Monetized Installment Sale (MIS) amount is $20,000 per installment.