At Malloy, Montague, Karnowski, Radosevich & Co., P.A., we provide a full range of accounting and tax services to help clients reduce taxes. Every legal contract and business deal have underlying tax consequences. Often, they are overlooked unless a tax advisor is proactively involved. We help our clients reduce taxes before agreements are signed.
What are some examples of how Malloy, Montague, Karnowski, Radosevich & Co., P.A. can often get you more favorable tax treatment?
1.) If you will be the recipient of payments, sometimes it makes more tax sense to have installment payments spread over different tax years. On the other hand, if you are the payor then it might make sense to concentrate payments in a specific tax year where deductions might be more beneficial.
2.) There may be transactions that can be characterized, partially or entirely, as capital gain transactions (taxed at lower rates) rather than ordinary income transactions (taxed at higher rates). It is helpful to clarify these issues before the contract is signed.
3.) If you are selling or buying business, how the price is allocated among various assets can have enormous tax consequences. For instance, payments you receive for personal goodwill may be taxed at the lower capital gain rate while payments you receive for other assets may be taxed at the higher income tax rate. Therefore, it’s important that the purchase agreement addresses how price is allocated because it can have enormous effects on how much tax is paid.
4.) Lastly, in order to evaluate a contract’s real economic benefit, it always helpful to have up-front tax advice before the contract is signed.
Take-away: Every legal contract has tax consequences. Don’t assume your lawyer has necessarily considered them. At MMKR, we advise you about the taxes you face and ways to often minimize them before you sign a contract. Call us today for an appointment.
“Sale of Business,” – IRS Publication (Dec. 20, 2019).
“A Comprehensive Guide To Due Diligence Issues In Mergers And Acquisitions,” Forbes (Mar. 27, 2019).