Author: Praestans Global Advisors

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Avoiding Dividend Reclassification: Key Tax Takeaways for Closely Held C-Corporations | Clary Hood, Inc. v. Commissioner, 69 F.4th 168 (4th Circuit)

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This case highlights the need for C corporations to have a dividend policy and history. It also highlights the need to carefully consider the compensation paid each year to the shareholder-employee of a closely held corporation to have better support of reasonable compensation in order to avoid the recharacterization of deductible compensation to nondeductible dividend distributions. It would likely have been tax advantageous for the Taxpayer to be an S corporation. […]

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Tax Complications of an Earnout: How Earnouts Trigger Tax Considerations in M&A Deals

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An earnout is a contractual mechanism in acquisitions that provide for contingent additional payments from the buyer of the company to the seller’s shareholders. Earnouts are usually received if the business that is acquired meets certain financial or other milestones after the acquisition is closed.

An earnout is a useful tool where the buyer and seller cannot agree on the upfront purchase price, with the earnout as a way of overcoming the different views on valuation of the business being acquired. Earnouts are primarily used in the acquisition of a privately held company which are harder to value than a publicly traded company. […]

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The Critical Role of Tax Treatment and Structuring in International M&A

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There can be additional complexities involved in cross-border acquisitions. It is important to understand the tax treatment in each country in order to ensure the acquiror and target receive the desired result. Techniques for acquisitions in one country can be different than in the other and the resulting tax implications can be significant even if unintended. […]

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Follow the Cash Flows of the Acquisition to Understand the True Return to the Sellers

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Cross-border acquisitions usually have additional complexities as the laws of more than one country must be planned for and coordinated.  Typical acquisition planning in one country may be different than in another country.  A structure that is common in one country may significantly change the deal for an acquiror or target in another country. […]

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Structuring for Tax-Exempt Investors

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Tax implications often determine how certain types of investors will invest in a fund.  There are various categories of investors that have competing tax implications so it is important that the fund can accommodate the competing tax interests of the investors.  One category of investors are tax-exempt investors and planning for unrelated business income tax (“UBIT”).  […]

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