In an earlier post, we noted that a parent who owns a business faces some difficult issues regarding the disposition of that business among his or her children. Among the options to be considered is a sale of the business, which would allow the parent to treat the children equally, inasmuch as each may
Prodigal Son Redux? Balancing the Family Business and Bequests to Your Children
“There was a man who had two sons; and the younger of them said to his father, ‘Father, give me the share of property that belongs to me,’ and he divided his land between them. Not many days later, the younger son gathered all he had. . .and squandered his property in loose living
S Corps: Not Gone Yet
It has become relatively rare for an accountant or attorney to recommend the use of an S corporation for a newly-formed, closely held business. Instead, the LLC, taxable as a partnership, has become the entity of choice for most start-ups, and for good reason: it is a flow-through entity for income tax purposes, and it
Profits or Capital Interest?
A partnership is not subject to Federal income tax. Instead, an item of income or loss of the partnership retains its character and flows through to the partners, who must include such item on their tax returns. Generally, some partners receive partnership interests in exchange for contributions of cash and/or property, while others receive partnership
Need Capital? Closely Held?
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.
“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
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,
Rolling Over the Parent’s Equity
It is not unusual for a parent to have successfully started and grown a business, only to find that his children either have no interest in continuing the business or are incapable of doing so. Prior to that moment of realization, however, Parent may have transferred equity in the business to his children, either as
Related Party Sales
In the context of a family business, we are sometimes presented with situations in which the business wishes to sell property to, or acquire property from, a family member or an affiliated business in which he is involved. The transferors are often surprised by the tax consequences of these transactions.
Assume that Taxpayer owns land