A rapidly growing, closely-held business may find itself in need of additional capital. When the owners of such a business do not have the liquidity or disposable assets from which to provide such capital, and with traditional lenders often unwilling to extend the necessary credit on acceptable terms, many close businesses have turned to private
New York Business, the Federal Tax Return, and New York Domicile
We all know a story like Bill’s: Bill is a New Yorker that has built a successful business and has attained a level of financial security. His kids are grown, and have moved to the West Coast.
Bill decides that it is time to enjoy the fruits of his labor, preferably in a warmer climate.
Succession Planning: Several Ways to Skin A Cat
One of the issues most often encountered by the owner of a closely held business is succession planning. This may be especially difficult where no member of the owner’s family is involved in the business. In that case, the owner may have to consider the liquidation of his interest in the business, either by way
Deferring the Estate Tax: Section 6166
When the owner of a closely-held business dies, his or her estate immediately encounters what may be a major challenge: liability for the estate tax resulting from the value of the decedent’s interest in the closely-held business. In general, this tax must be paid within nine months of the decedent’s death, and it is often
“Wandry”ing About Defined Value Clauses?
Taxpayers sometimes employ a so-called “defined value clause” (“DVC”) in connection with a gift of property that is difficult to value, such as an equity interest in a closely-held business. In the case of such a gift, the value of the business interest – the amount of the gift – is never really “established” for
Recapitalize With Care! (The IRS is Watching)
A recapitalization is an exchange between one corporation and its shareholders or security shareholders. It has been described as a “reshuffling of a capital structure within the framework of an existing corporation,” and it is one of the most common forms of reorganization encountered in the case of a closely-held business. Simple examples include the
Sales Tax in M&A, Part III: The Income Tax Impact of Sales Tax
We noted earlier that sales tax is often viewed as a “sideshow” to income tax considerations in structuring a deal. Regardless, it represents real economic cost to the payor. To appreciate its “true” cost, however, one must also consider its income tax consequences.
In the case of the seller or transferor who pays the tax,
Sales Tax in M&A, Part I: The Economics of the Deal
Why are taxes so important to the sale of a closely-held business? Economics. Any deal, whether from the perspective of the seller or of the buyer, is about economics, and few items will impact the economics of a deal more immediately and certainly than taxes. The deal involves the receipt and transfer of value, with
(Un)reasonable Compensation: When Hindsight Isn’t 20/20
In the recent case Thousand Oaks Residential Care Home I, Inc. v. Commissioner, the Tax Court considered whether a corporation’s compensation packages for its owner-employees were unreasonable and thus disallowable as deductions. The facts can be summarized as follows: in 1973, Petitioners “Mr. and Mrs. F.” purchased a struggling corporation called Thousand Oaks Residential
Splitting Up The Family Partnership
In the choice of entity debate, the ability to divide the corporation’s business assets and activities into two or more separate corporations, owned by different shareholders, without incurring taxable gain, is often said to be one of the more significant advantages enjoyed by the corporate form of business. However, though the partnership provisions of the