M&A focused CPA and tax attorney | tax diligence and structuring on deals ranging from $1m to $40b | ex-PwC and Deloitte | tweets are not legal or tax advice
My introduction:
I am a CPA and tax attorney (both licensed in CA) who focuses on assisting buyers and sellers through transactions. I specialize in buy-side and sell-side tax due diligence, tax structuring, and tax modeling. My deal experience ranges from $40b to $1m.
I was
Had a great chat with
@Eli_Albrecht
about how critical it is for searchers to have a handle on the most advantageous tax structure for their acquisition at the LOI stage.
Including tax concepts in your LOI will help to ensure that you receive the intended tax benefits.
What is tax diligence and why it is important?
Tax diligence is a deep dive into the historical (generally the past 3 years) tax compliance of the target entity. Tax diligence is a wholistic and strategic look under the hood. This provides a buyer with an understanding of the
If an otherwise stock deal is executed using a tax election (e.g. 338(h)(10)) or F reorg, how often are you seeing/asking for a gross up calculation?
Would it be helpful for me to post about what is a gross up payment and when should you ask for it?
@Albrecht_Law
@Eli_Albrecht
@Albrecht_Law
Thank you
@Eli_Albrecht
. I’m honored to be part of such a talented and fast growing team! I look forward to providing excellent M&A tax services to benefit our clients.
To F or not to F, that is the question.
I’m talking about an F Reorganization of course.
@Eli_Albrecht
and I have answered this in our joint post below. Reach out if any questions or if this strategy may be helpful to you in a current or future deal.
M&A Monday: The Almighty F-Reorg
In an equity purchase, you must consider an F-Reorg
This M&A Monday is co-drafted and posted with
@JoshuaASiegel
, Partner and Chair of Transactional Tax Group at
@Albrecht_Law
because he is the tax genius and expert on F-Reorgs and all
That’s right,
@Eli_Albrecht
. Only eligible shareholders can own S corp stock. LLCs are not eligible shareholders. If an LLC (or any ineligible shareholder) acquired S corp stock the S corp reverts to a C corp. Careful tax structuring is required to end up with the intended tax
On a recent deal (stay with me), I learned that in a deal with a partial change of ownership with an SBA 7a loan (the SBA compliant version of rollover), if there are investors, and an SPV is not created to acquire the business, each investor (regardless of their percentage
Do you regularly include tax structuring considerations in your LOI?
If not, I highly recommend that you do as you could be leaving important benefits on the table.
Feel free to reach out to before you submit your LOI
@Albrecht_Law
Importance of tax inputs when drafting an LOI:
An LOI is often the first formal written documentation that a prospective buyer provides to the seller. First impressions matter, especially, with regard to an LOI. As much as an LOI may be non-binding, it sets the “tone” of the
When buying a business it is paramount to understand the tax implications of your chosen legal entity structure. The legal entity structure should be 1) built around your business and financial objectives and 2) create tax efficiencies. This decision should be made after a
There isn’t a one size fits all approach when it comes to guiding a client through their deal as transactional tax counsel.
When a significant tax issue arises during diligence what do you do? Do you rely on indemnities in the purchase agreement and call it a day? Do you
The ABA is asking the IRS to provide guidance that would further streamline certain F Reorganization transactions.
Please reach out if you have any questions
@Albrecht_Law
Sec. 1202 - qualified small business stock (“QSBS”) - is an extremely business owner/investor friendly tax code section. At a high level, the benefit (if you qualify) of 1202, as a seller, is that you can exclude the greater of $10m or 10x your investment in the shares being sold
Your M&A tax advisor should be able to do more than just uncover unknown tax risks during diligence — they should also strategically guide you on how to mitigate those risks (where available) and how to achieve a commercially viable solution.
#taxdd
#duediligence
#tax
#deals
If you are acquiring a partnership interest in your deal - do you know what a “push-out” election is and do you know the benefits to the buyer? If not, you could be taking on more historical income tax risk than you realize.
@Eli_Albrecht
and I were discussing this earlier
@sbabmarks
and I had a great conversation today about the use of F reorgs in deals involving S corps.
What questions do you have about tax structuring?
What questions do you have regarding how to deal with potential tax issues that pop up during diligence?
@Eli_Albrecht
Thank you
@Eli_Albrecht
- we’re building something special here. It’s a pleasure to work with such great clients and on such exciting deals.
Independent sponsors often come to the table with great questions about which legal entity type will be most beneficial for their deal. While this is critically important, it is also critically important to consider the tax implications of the Sponsor’s topside holding structure.
How are all the searchers out there thinking about tax diligence?
The scope should be tailored based on the Target’s legal entity structure and operations.
Let’s talk about how to make tax diligence a strategic value add to your acquisition process.
@Laura_W_Gieseke
Been having this same conversation a lot lately and completely agree. The 21% C corp tax rate was a game changer and if you can throw in QSBS then it’s a potential home run.
@JoshuaASiegel
@Eli_Albrecht
Another one: If you are contributing money to a property PS, you should ask for a remedial method allocation, so you can benefit as if you purchased an interest in the depreciable property. If not, you are paying more tax than necessary.
Know when a 338(h)(10) vs a 336(e) election is the right call. Worked with
@CBarrett_CPA
to assist a searcher in a jam.
Let’s talk about how to structure your deal.
@petercnordberg
@petercnordberg
I would add that the LOI should minimally provide directional guidance regarding the intended structure and tax treatment of the structure. It is very important to include any tax elections or desired pre-transaction structuring in the LOI.
Had a great chat with
@CBarrett_CPA
today about the need to ensure searchers are not only obtaining a high quality QofE, but also thorough tax due diligence. High quality diligence up front helps you 😴😴😴 well.
@PhillySMB
In a transaction involving a 336(e) election the potential buying entities are more broad than just C and S corps.
You could also include a column on ability or ease of a tax deferred rollover in a particular transaction type.
Happy to discuss in more detail.