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Stock Seller Sues Buyers for Failure to Close S Corp Books to Obtain Q1 Taxable Loss

July 27, 2020 Introduction One tax issue when selling the stock of your S corporation business midyear is dividing up the year’s income and expenses. That is because an S corporation passes its income, and expenses through to the owners

Posted in further assurance provision, S corporation, Section 1377 election Tagged with: ,

Chosen Merger Structure Accelerates over $2 million in Taxes for Seller

July 21, 2020 Introduction Selling a business usually generates significant tax consequences. However, a transaction can sometimes be structured to defer the payment of taxes. The deal The business owner held the KFC and Pizza Hut franchises in Russia through

Posted in boot, cash, form over substance, merger, substance over form, tax deferred reorganization Tagged with: ,

Buyer of Target Can Sue Sellers for $9 Million of Pre and Post Sales Tax Liabilities

July 15, 2020 Introduction It can be challenging for a national footprint business to navigate the 11,000 sales tax jurisdictions in the United States. Thus, buying a large business presents state and local sales tax risk. The deal This deal

Posted in fraud carveout, post-closing sales tax, pre-closing sales tax, sales tax risk Tagged with: ,

Typo Forces Stock Seller of Business to Sue Buyer for Pre-Closing Tax Refund

July 10, 2020 Introduction There are lots of words in acquisition documents. A stock purchase agreement in a relatively simple transaction may contain 20,000 words. And there are many different references throughout the agreement to buyer and seller; and sometimes

Posted in allocation of preclosing taxes refunds and credits, stock purchase agreement, typo or scriverner's error Tagged with: ,

$3.5 Million Buyer Refund – No Transfer of Seller Unemployment Comp Experience

July 10, 2020 Introduction One tax expense to project when buying the assets of a business is unemployment compensation tax. Especially if the buyer is going to hire the seller’s employees. A potential risk for the buyer is inheriting a

Posted in seller's unemployment experience rating, successor liability Tagged with: ,

Seller $309 Million Stock Gain May Be Nonbusiness Income and Escape CA Franchise Tax

July 8, 2020 Introduction One tax risk of a multistate corporate business selling the stock of a subsidiary is exposing the gain to many states with different rules and tax rates. The deal The seller here provides credit and debit

Posted in nonbusiness income/sale of subsidiary, state franchise/income tax, unitary business Tagged with: ,

Seller Owner Must Pay Sales Tax on Underreported Buyer Liquor Sales Made Before Closing

July 8, 2020 Introduction Selling a business with a liquor license takes time. The buyer cannot acquire the license or permit without state approval. The buyer and seller sometime agree to a transitional arrangement where the buyer takes over the

Posted in pre-closing management agreement, seller owner responsibility for underreported sales tax Tagged with: ,

$2.8 Million Tax Cost for Failure to Follow Planned Structure of Subsidiary Sale

July 6, 2020 Introduction The formalities of a sale of a business can have significant tax consequences to the owners. It is important that the preferred structure of the sale is implemented. And that means that the seller and the

Posted in mutual mistake, structure of transaction, Taxation Tagged with: ,

M&A Escrow Did Not Adequately Secure Risk of Seller Nonpayment of Foreign Taxes

Wednesday, July 1, 2020 Introduction A buyer of the assets of a business does not want responsibility for the income taxes that apply to seller’s gain from the transaction. So how can the buyer manage the risk of the taxing

Posted in escrow, foreign income tax Tagged with: ,

Business Asset Buyer May Face $100 Million Payroll Tax Successor Liability Claim

June 30, 2020 Introduction One M&A tax risk in an asset acquisition is seller’s unpaid payroll taxes. The deal The buyer in this case purchased the assets of a financially distressed business for approximately $7.3 million dollars payable at closing

Posted in asset purchase, payroll tax, successor liability Tagged with: ,

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