Business

Tax Savings and Deal Economics

It is a basic tax principle that the more (or the sooner) a seller pays in taxes on the sale of its business, the less will be the economic benefit the seller realizes from the sale. Similarly, the fewer the tax savings that the buyer realizes from the acquisition of the business, the less will be the economic benefit the buyer realizes from the acquisition.[i]

Allocation of Purchase Price

In most cases, these “truths” are first considered in determining the form of the transaction – a purchase and sale of assets or of stock. They become prominent again in the context of allocating the consideration[ii] actually, or deemed to have been,[iii] paid and received for the actual or deemed purchase and sale of the assets comprising the business.

Continue Reading When a Buyer’s “Tax Cost” for an Acquisition Exceeds Expectations

The Nonprofit Sector

According to a report released earlier this year by the Federal Reserve Bank of Richmond, nonprofit organizations contribute more than 5 percent of the nation’s GDP and account for almost 10 percent of “private sector” employment.[i]

Those are impressive statistics and, understandably, may be interpreted as characteristic of an industry that constitutes a significant economic driver, at least until one realizes the significant “public” source of the nonprofit sector’s revenues.

Continue Reading OBBBA and the Self-Imposed Tax Known as Charitable Giving

It’s not at all unusual to encounter the owner of a New York business who dreams about leaving the State. The reasons often given for the desired move include, among others, the cost of doing business in New York, the State’s over-regulation of business and, probably most of all, its hostile tax environment.[i]

Lately, however, many more New Yorkers are talking about leaving the State. When you ask them why, they’ll recite a litany of familiar reasons, including those mentioned above. Generally, they seem sincere when they tell you they’re committed to doing whatever it takes to make a new home elsewhere.[ii] That is until you explain that “whatever it takes”[iii] requires (i) a lot of patience which, it turns out, many of these individuals do not have, (ii) a lot of effort, which they are unwilling to invest, and (iii) some sacrifice, which . . . well, forget about that.

A recent decision of New York’s Tax Appeals Tribunal[iv] illustrates one couple’s attempt at leaving the State. The Taxpayers (Husband and Wife) implemented many of the steps that must typically be taken to establish a change of domicile away from New York. Unfortunately for them, they were premature in thinking they had succeeded in doing so. Their missteps may serve as a lesson for others who genuinely aspire to one day describe themselves as “former New Yorkers.”[v]

Continue Reading Escape from New York – It’s Not That Easy

Change May Be Good

The enactment earlier this year of the One Big Beautiful Bill Act (the “Act”)[i] generated a fair amount of excitement in the business community.[ii]

If one had to identify a single provision of the Act in which the owners and prospective owners of start-up and emerging businesses have expressed particular interest, the amendment of the Code’s gain-exclusion rule for the sale or exchange of stock of a qualified small business[iii] may be the one most frequently mentioned.

Continue Reading Qualified Small Business Stock – Be Mindful of the ‘Acquisition Dates’ When Applying OBBBA’s Enhanced Gain Exclusion Rule

C Corp
Imagine a closely held and growing start-up business (“Corp”) that was recently incorporated under state law and, so, is treated as a regular C corporation for purposes of the federal income tax.[i]

Thus, Corp will pay income tax on its taxable income,[ii] and the losses generated in Corp’s first few years of operation – not uncommon with a start-up – will be trapped within Corp and cannot be passed out to Corp’s shareholders for their own use.[iii]

Continue Reading Gifting Qualified Small Business Stock – Can You “Stack” the Section 1202 Odds In Your Favor?

Not Long Ago

In the months preceding the general election in 2024, the owners of many closely held businesses who had not yet given much thought to the disposition of their future estates, including their businesses,[i] decided they should meet with their attorneys and other advisers[ii] to see what steps they should consider taking to protect their wealth, which in many, if not most, cases resided primarily in their business.

What prompted many of these owners to act was a sense of urgency arising from the realization that the federal transfer tax[iii] benefits and other tax benefits made available to them by the 2017 Tax Cuts and Jobs Act[iv] were going to expire after 2025 (perhaps sooner);[v] these included the enhanced unified estate and gift tax basic exclusion amount,[vi] the increased generation-skipping transfer tax exemption amount,[vii] the reduced top marginal income tax rate for ordinary income,[viii] and others.

Continue Reading The Enactment of OBBBA: It’s Time to Plan, Not Relax – “Winter is Coming”

Two Camps

Last month, Bloomberg carried an article about a “small but growing trend” of states that are either cutting their individual income taxes or phasing them out entirely.[i]

According to the article, the states adopting these measures have determined that, by reducing income taxes, they will enhance their ability to attract and retain people and businesses.[ii]

Continue Reading State Taxation of a Nonresident’s Gain from the Sale of Stock –The Shot Heard Round the Country?

Do This But Not That

Charitable organizations are dependent, in no small part, upon the financial support of many successful business owners. The generosity of these individuals and their organizations may be a manifestation of several factors including, for example, their gratitude to the communities in which they have thrived, a willingness to share their good fortune for the benefit of others, and – less altruistically – a desire for public recognition[i] and the “incidental” benefits arising therefrom.[ii]

Continue Reading Transferring the Family Business To A Private Foundation? Are You Sure About That?

NYC Transfer Tax

According to the New York City Comptroller, the City collected approximately $1.13 billion in Real Property Transfer Tax (“RPTT”) in the FY 2024. The Comptroller’s Office has forecast that $1.21 billion of RPTT will be collected in FY 2025.[i] Impressive figures by most measures, but just a drop in the proverbial bucket compared to the City’s total tax revenue for FY 2024 of almost $75 billion,[ii] and of its estimated tax revenue of more than $77 billion for FY 2025.[iii]

Still, the RPTT is no laughing matter when one considers that the tax is imposed at a rate of 2.625% of the purchase price for the “transfer” of commercial “real property,” or of an “economic interest” in such property,[iv] located within the City, where the value of the property is more than $500,000.[v]

Continue Reading NYC Transfer Tax, Charities, and Single Purpose LLCs – Are Lenders Beneficiaries?

Tax Receipts

Late last year, the Office of the State Comptroller (the “OSC”) estimated that sales and use tax receipts would increase by 2.3% in the SFY 2024-2025.[i]

The OSC also projected that collections from sales and use taxes would increase by 3.5 percent for SFY 2025-2026.[ii]

Part of this increase is undoubtedly attributable to the efforts of the Department of Taxation and Finance to identify taxpayers who failed to collect and/or remit the correct amount of sales tax.[iii]

Continue Reading New York Sales Tax: When a Responsible Person Acts Irresponsibly