Although the business terms of a merger transaction are usually not driven primarily by tax consequences, the purchaser and seller do consider tax consequences in arriving at the business terms. With that in mind, certain of President-elect Trump’s tax proposals, if enacted, could impact the bottom line in merger transactions. One of President-elect Trump’s proposals is to reduce the individual income tax to three brackets with the following rates – 12%, 25% and 33%. If you are selling your business, then depending on your current tax rate, the tax rate cuts, if enacted, may affect your after tax return from the sale. On the purchaser’s side, President-elect Trump has proposed to in large part do away with depreciation of assets over time and allow immediate tax write-offs of the costs of acquired assets. This proposal, if enacted, could substantially increase after tax net cash flow of the purchaser in the first year after the purchase. There are other Trump tax proposals that could affect your transaction. Although it remains to be seen if and when the Trump tax proposals will be enacted, it would be prudent to keep abreast of them as you negotiate the purchase or sale of a business.
ABOUT GLENN D. SOLOMON
Glenn D. Solomon Esq., is a principal at the law firm of Offit Kurman and has provided counsel to businesses and business owners for more than twenty-five years, with extensive experience in the purchase and sale of businesses, structuring ownership agreements, and advising companies in financial distress.
ABOUT OFFIT KURMAN
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