Making an investment in a company with significant R&D spend?
On Friday, September 8, 2023, the IRS and Treasury published Notice 2023-63 (the “Notice”), announcing their intention to propose regulations related to the amortization of research and experimental (“R&E”) costs. The forthcoming guidance anticipated by the Notice addresses (1) the capitalization and amortization of R&E expenditures pursuant to the Tax Cuts and Jobs Act (“TCJA”) of 2017, (2) the interaction of §174 and rules related to the tax treatment of long-term...
Whose Stock is it Anyway? – Applying FIRPTA Regularly Traded Stock Exception to Stock Held by Partnerships
On May 12, 2023, IRS Office of Chief Counsel issued GLAM 2023-003 (the “GLAM”) analyzing the application of the “regularly traded stock exception" in Section 897(c)(3) to stock of a US real property holding corporation (“USRPHC”) held by partnerships. Though not binding on the IRS, the GLAM provides helpful insight into the IRS view as to whether to apply the exception at the partner or partnership level. Section 897 Background Section 897 was enacted as part of the Foreign...
Takeaways from the Inaugural Tax Insurance Forum – Presented by Leo Berwick
The recent inaugural Tax Insurance Forum (TIF) hosted by tax advisory firm Leo Berwick in New York provided an opportunity for tax insurance brokers and underwriters to engage in a lively discussion led by several panelists. “The tax insurance market has grown substantially, beyond traditional M&A,” said Joe Volk, Managing Director at Leo Berwick. “It requires brokers, underwriters, and underwriter counsel to be creative in assessing non-traditional risks and to have...
Return to Sender – Treasury Issues Proposed Regulations under Section 367(d) Concerning Repatriation of Intellectual Property
On May 2, 2023, the Treasury Department and IRS released a new set of proposed regulations (the “Proposed Regulations”) which, under certain circumstances, would eliminate the annual income inclusion required under Section 367(d)[1] when intangible property (“IP”) is repatriated to certain U.S. persons. Taxpayers may be interested in returning IP to the U.S. for a variety of reasons, including taking advantage of the Section 250 deduction for “Foreign Derived Intangible...
Leo Berwick Adds Senior M&A Tax Experts To Rapidly Growing Firm
Three new female leaders round out firm’s diverse talent roster Leo Berwick, a leading M&A tax advisory firm today announced the addition of three senior tax experts to the consultancy’s expanding and diverse team. Tania Wang joins the company as a Partner from Deloitte, where she most recently held the role of M&A Tax Managing Director. Tania’s client base at Deloitte included primarily large and middle market private equity companies across a variety of sectors,...
FIRPTA Traps – Greenfield Projects and Start-up Businesses
By now, most foreign investors that are investing in US real property or US infrastructure projects have likely encountered the Foreign Investment in Real Property Tax Act of 1980 (“FIRPTA”). In general, FIRPTA was enacted to impose a tax on gains derived by foreign persons on the disposition of US real property interests (“USRPI”). Included in the definition of a USRPI is a US real property holding company (“USRPHC”), which is a corporation whose assets consist of more...
What is FIRPTA? A Guide for Buyers and Sellers in M&A Deals
What is FIRPTA? The Foreign Investment in Real Property Tax Act (FIRPTA) is a tax law that enables the IRS to tax non-US persons on their dispositions of U.S. Real Property Interests (USRPI). Understanding the application of FIRPTA is critical in conducting tax due diligence of Target companies, as the application of FIRPTA can have a significant impact on the after-tax IRR of a potential acquirer’s bid model, as well as create additional complications when...
Profits Interests vs Options – To Do or Not to Do?
Granting employees equity interests helps keep employees and key executives invested—both financially and emotionally—in the business, thereby incentivizing employees and encouraging employee retention. For startups and small businesses that are low on cash, granting equity interests is also a way to compensate employees, recruit new talent, or give current employees a raise without dipping into the current year’s cash reserves. Equity compensation is a broad category that...
Section 338(h)(10) Election – The Unicorn of M&A
Perhaps you’re the owner of a medium-large corporation and you’re looking to buy a smaller corporation or even a unicorn. And by unicorn, I don’t mean the mythical beast, but rather the mythical startup. Today we’ll talk about another kind of unicorn, one entirely different than an elusive $1 billion startup. The (unofficial) unicorn of the tax world might just be the magical 338(h)(10) election. Section 338(h)(10) Election Scenario 1 ...
The How To Guide to M&A: Shareholder Loans
This article will provide a brief overview of what a shareholder loan is, and the difference between equity and debt as two types of loans. Next, the tax consequences to corporations of shareholders’ interest on loans will be discussed. The last section will mention a few of the impacts that shareholder loans can have on target and acquiring companies as they undergo the process of a merger or acquisition. What is a shareholder loan?...