Tax Issues in Sale of Partnership and LLC Interests: Structuring the Purchase Agreement

Best Practices for Drafting and Negotiating Tax Provisions

Recording of a 110-minute CLE/CPE webinar with Q&A


Conducted on Wednesday, November 20, 2013

Recorded event now available

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Program Materials

The CLE webinar will review the tax issues involved with the purchase and sale of a partnership or LLC interest. The panel will focus on addressing allocation of income gains and losses, allocation of purchase price, and payment terms in the purchase agreement, and will discuss tax considerations from both the buy and sell side.

Description

The IRC code provisions regarding the sale or transfer of a partnership or LLC interest are complex, and counsel representing both parties should have a thorough understanding of the income tax consequences of the transaction. Tax issues impact the negotiation, structure and price of the deal terms.

Practitioners must consider a broad spectrum of buy- and sell-side issues, including evaluating the pros and cons of an asset sale vs. an entity sale. In the case of an asset sale, counsel must also understand the types of assets involved in the transaction.

The tax implications involved in structuring payment terms and deferred payment arrangements are significant. Counsel must assess the allocation of the purchase price, taking into account the tax implications of the price allocation and the different tax impacts on both the buyer and seller.

Listen as our panel of experienced tax attorneys outlines and analyzes the myriad of tax issues from the buyer's and seller's perspective when negotiating, structuring and crafting the terms of a purchase and sale agreement in connection with the sale or transfer of a partnership interest.

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Outline

  1. Tax implications for buyer and seller
    1. Amount and character of seller’s gain or loss
    2. Buyer’s cost basis and the Section 754 election
    3. Installment reporting for selling partner
    4. Allocation of income and loss between buyer and seller (entire vs. partial interest, Section 706)
  2. Structuring the sale: asset vs. entity sale
  3. Allocation of purchase price in an asset sale
    1. Type of assets sold
    2. Section 751 hot assets
    3. Tax implications of the tax allocations
    4. Buyer vs. seller tax considerations
  4. Structuring payment terms
    1. Cash
    2. Installment payment
    3. Balloon payment
    4. Covenants not to compete
    5. Consulting agreements

Benefits

The panel will review these and other key questions:

  • How can counsel guide clients in evaluating the pros and cons of an asset sale vs. an entity sale?
  • What tax issues must counsel consider in allocating the purchase price?
  • What are the tax implications in structuring payment terms and deferred payments in connection with the sale of a partnership interest?

Following the speaker presentations, you'll have an opportunity to get answers to your specific questions during the interactive Q&A.

Faculty

Christopher McLoon
Christopher McLoon

Partner
Verrill Dana

Mr. McLoon advises clients on structuring business transactions to achieve optimal business and tax results. He applies...  |  Read More

Timothy J. Leska
Timothy J. Leska

Pepper Hamilton

Mr. Leska focuses his practice on general tax matters. Prior to joining Pepper Hamilton LLP, he was an attorney in...  |  Read More

Chad R. Resner
Chad R. Resner
Senior Manager
KPMG

Mr. Resner is a Senior Manager in KPMG LLP’s Washington National Tax Passthrough practice. He advises KPMG...  |  Read More

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