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

Recording of a 90-minute premium CLE/CPE video webinar with Q&A

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Conducted on Wednesday, February 2, 2022

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Course Materials

The CLE/CPE course will review the tax issues involved with structuring purchase agreements for partnership or LLC interests. The panel will address allocation of income gains and losses, allocation of the purchase price, payment terms in the purchase agreement, and the impact of current tax law and recent regulations, as well as discuss tax considerations from both the buy and sell sides.

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.

Current tax law and other implications involved in structuring payment terms and deferred payment arrangements are significant. Counsel must assess the purchase price allocation, 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. Asset vs. Equity Sale
    1. Amount of seller's gain or loss
    2. Character of seller's gain or loss
    3. Holding period issues
    4. State income tax
    5. Sales tax
    6. Real property transfer tax
    7. Real estate taxes
    8. COD on or after sale
    9. Abandonment
    10. Suspended 704(d) losses
    11. Suspended 465 at risk losses
    12. 1231 loss versus capital loss
    13. 1231 gain versus capital gain
    14. 1231 unrecaptured loss on MFJ return
    15. Partnership with built in loss
    16. Centralized partnership audit regime
  2. Tax implications for buyer and seller
    1. Buyer's cost basis and the Section 754 election
    2. Installment reporting for selling partner
  3. Allocation of the purchase price
    1. When required
    2. Strategies
    3. Sample provision
    4. Methodology
  4. Structuring payment terms
    1. Cash
    2. Rollover equity
    3. Compensatory amounts

Benefits

The panel will review these and other crucial questions:

  • How can counsel and tax advisers guide clients in evaluating the pros and cons of an asset sale vs. an entity sale?
  • What are the tax issues to 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?
  • How does new tax law factor into negotiating and drafting purchase agreements for partnership and LLC interests?

Faculty

Baker, Mike
Mike Baker, J.D., LLM

Managing Partner
Baker Tax Law

Mr. Baker advises clients with respect to domestic tax matters and employee benefits and compensation. His clients...  |  Read More

Bell, Kuno
Kuno S. Bell, CPA, J.D.

Managing Partner
Pease CPAs

Mr. Bell's portfolio includes partnerships, limited liability corporations and sectors including nursing homes,...  |  Read More

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