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Tax Treatment of Earnouts in M&A Transactions: Navigating Key Tax and Accounting Implications for Buyers and Sellers

An encore presentation with Live Q&A.

A 90-minute premium CLE/CPE video webinar with interactive Q&A

This program is included with the Strafford CLE Pass. Click for more information.
This program is included with the Strafford CPE+ Pass. Click for more information.
This program is included with the Strafford All-Access Pass. Click for more information.

Monday, September 30, 2024

1:00pm-2:30pm EDT, 10:00am-11:30am PDT

or call 1-800-926-7926
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This CLE/CPE webinar will guide attorneys and tax professionals on key tax considerations when structuring earnouts in M&A transactions for buyers and sellers. The panel will discuss key provisions when structuring earnouts, the tax and accounting issues for all parties involved, and best practices in ensuring tax compliance while also achieving the intended benefits for buyers and sellers.

Description

M&A transactions routinely include earnout provisions as a valuation-bridging mechanism to alleviate concerns by both parties about tendering or receiving a fair purchase price. However, attorneys and tax professionals must recognize the tax implications of earnouts in M&A transactions and plan accordingly when negotiating and structuring earnouts.

Earnouts can allow either an upward price adjustment post-closing--when sufficient value is created to justify a higher purchase amount--or innovative financing for an originally agreed upon price. Further, earnouts can deter disagreements during the negotiation of the deal price only to result in post-closing disputes over the earnout itself.

A sale of a privately-held company involving an earnout raises a number of tax challenges, such as the tax treatment and calculation of gain each year, the classification of earnout payments for income tax purposes, and other critical tax considerations for earnouts in M&A transactions.

Listen as our panel discusses key provisions when structuring earnouts, the tax and accounting issues for all parties involved, and best practices to ensure tax compliance while also achieving the intended benefits for buyers and sellers.

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Outline

  1. Earnouts in M&A transactions
  2. Tax considerations with earnouts and other deferred payments
    1. Ordinary income vs. capital gains
    2. Determining proper tax treatment
    3. Timing of the tax to seller
    4. Imputed interest
  3. Best practices for drafting tax provisions in the deal documents

Benefits

The panel will discuss these and other key issues:

  • The advantages and disadvantages of earnouts in M&A transactions
  • Critical factors in determining the proper tax treatment of earnouts and other deferred payments
  • Key tax considerations in structuring earnouts and other deferred payments in connection with an M&A deal

An encore presentation featuring Live Q&A.

Faculty

Stieff, Elizabeth
Elizabeth Fialkowski Stieff
Partner
Venable

Ms. Stieff focuses her practice on tax advisory and planning matters for domestic entities and individuals. She...  |  Read More

Wukelic, Joel
Joel Wukelic
Director
Stout Risius Ross

Mr. Wukelic advises private equity firms as well as public and private companies throughout the M&A transaction...  |  Read More

Attend on September 30

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Cannot Attend September 30?

You may pre-order a recording to listen at your convenience. Recordings are available 48 hours after the webinar. CPE credit is not available on recordings. Strafford will process CLE credit for one person on each recording. All formats include course handouts.

To find out which recorded format will provide the best CLE option, select your state:

CLE On-Demand Video

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