When a C corporation is sold, tax planning is critical to minimize the “double taxation” inherent in C corporation transactions. Tax strategies can blend well with non-tax business considerations through careful planning and review of what both parties in the transaction are trying to achieve, according to Joseph B. “Jay” Darby III, an attorney with Greenberg Taurig in Boston and the author of CCH’s new Practical Guide to Mergers, Acquisitions and Business Sales. In a recent issue of CCH’s Business Valuation Alert newsletter, Darby outlines how C corporation sellers can use a wide range of strategies to reduce the tax hit for the corporation’s owners during a sale. Consulting agreements with the owners, non-compete agreements and other deal-structuring techniques can make taxes far less of a factor in the profitability of the sale while also meeting the business needs of the new owners. Creating a tax-smart deal requires going beyond a simple valuation of the business, Darby argues.

 

SEC Chairman Christopher Cox says that agency has established a close relationship with the IRS as well as the Financial Accounting Standards Board in the wake of Sarbanes-Oxley and other recent developments. Cox, speaking to the Seventh Annual Tax Policy and Practice Symposium, said income tax issues are second only to revenue recognition issues as a source of material weakness in financial statements. In a recent issue of TAXES — The Tax Magazine, Cox’s comments as well as those of PepsiCo’s senior vice president of finance, Matthew McKenna, indicated that increased focus will be put on tax issues by the SEC, FASB, auditors and other external examiners of corporate financial issues.

 

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As more companies look at what their core strengths are, the issue of outsourcing becomes a bigger part of their business plans. And that discussion leads to what is now called “offshoring” of functions such as R&D, IT and other processes that lend themselves to being performed elsewhere. China has increasingly become the home to these processes, but careful consideration of business structure and tax questions should be done up-front, according to tax practitioner Richard E. Andersen in a recent issue of CCH’s Journal of Taxation of Global Transactions. In this article, Andersen provides a checklist of tax considerations on both the U.S. and Chinese sides of offshoring arrangements. He also includes tips on what questions to ask when looking at the tax impact of outsourcing to China with some observations on tax breaks now being offered in China.

 

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As healthcare costs have continued to rise in recent years, Congress has provided more options to taxpayers looking to cut health care costs through various tax-advantaged options. Flexible Spending Accounts, Healthcare Savings Accounts and more options have given taxpayers many choices—and many questions to ask their tax practitioners. A recent edition of CCH’s CPE Credit Service by Sydney Kess and Barbara Weltman takes a close look at all of today’s options and their tax treatments. Plans for self-employed taxpayers, employers and business owners are considered as well as the effect of Medicare eligibility on the various options.

 

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Hours of Congressional debate and lots of tax practitioner billable hours are spent searching for deductions that taxpayers can use to reduce their tax bills. So the concept of not claiming a deduction for which the taxpayer qualifies seems almost un-American. But there are certain circumstances where, often for non-tax reasons, it’s to a taxpayer’s benefit to not claim certain deductions, according to professors Joseph D. Beams and W. Eugene Seago in a recent issue of CCH's TAXES — The Tax Magazine. The authors provide discussion of the following circumstances where not taking a deduction could be considered:

• Potential taxpayer benefit for non-tax reasons, such as disaster relief, insurance settlements, bank loans or a business sale
• Loss of credits that would create a lower refund
• Increased chances of an audit
• Paperwork required is more than deduction is worth
• Recognized income is needed to allow a Roth IRA contribution
• Failure to claim certain expenses would create a hobby loss rather than a business loss
• Increased state income taxes caused by itemizing deductions on the federal return

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