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

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

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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U.S. Taxation of U.S. Citizens and U.S. Tax Residents Residing Overseas – Mitigation of Double Taxation

There are two methods that a U.S. Person living abroad can use to reduce their U.S. tax liability.  The two methods are the Foreign Earned Income Exclusion (“FEIE”) and the Foreign Tax Credit (“FTC”).  Even if one of these methods were to eliminate the U.S. Person’s U.S. tax liability, the U.S. Person is still required to file their U.S. tax return if their income exceeds the filing thresholds for the tax year.  […]

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PFIC Testing for Foreign Portfolio Companies

Funds with U.S. investors, U.S. family offices, and individual U.S. investors (collectively, “U.S. Investors”) must be cognizant of whether their foreign investment in private companies is an investment in a passive foreign investment company (“PFIC”). Typically, a foreign portfolio company would be classified as a corporation for U.S. income tax purposes unless an election was made to have it taxed otherwise. The issue with PFICs is that unless certain elections are made, distributions from a PFIC may be subject to an excess distribution regime resulting in a punitive tax and interest charge. In certain bad circumstances, the punitive tax and interest charge can be the amount of the distribution. […]

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Importance of Semiannual and Annual OZ Testing

Fund managers must ensure their qualified opportunity funds (“QOF”) meet the requirement that 90 percent of the QOF’s assets are held in qualified opportunity zone (“QOZ”) property. Failure to meet the test can result in significant penalties to the QOF that can have a significant impact on the investment return to its investors. […]

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