Sometimes an acquired business has received income on which it has not been taxed, such as prepaid subscription income. The buyer will often have to assume the contractual obligation for which the seller has already paid. This advisory discusses the various issues associated with such a transaction, including the surprising possibility of the buyer's income inclusion.
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On June 10, 2010, the IRS issued Notice 2010-50, which provides importance guidance on net operating loss limitations in the context of ownership changes.
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Deal termination fees have become increasingly common, particularly in negotiated private equity transactions. Both targets and acquirers should be aware of the federal income tax treatment of these payments.
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Congress is again considering a potential change to the tax rate applied to “carried interests” – a form of profit earned by managers of private equity firms, as well as buyout firms, hedge funds and venture capital firms. Consequently, professionals in these industries are bracing for a change and examining alternatives to their current fund structure. Summarized below is an introduction to carried interests as well as a summary of the current debate regarding taxation of carried interests.
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A recently decided Delaware Chancery Court decision reinforces the validity and utility of the “poison pill” as a protective device available to a corporate board of directors. In Selectica, Inc. v. Versata Enterprises, Inc., Vice Chancellor John W. Noble upheld the decision of the Selectica board to adopt and use a poison pill to protect against the value of the company’s net operating losses (“NOLs”). The case involves a unique set of facts (among other things, this was the first intentional triggering of the modern poison pill) and offers several important lessons for practitioners.
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