Exits & M&A
Deal structure decides tax outcomes: asset versus stock, 338(h)(10) and F-reorganizations, earnouts and installment sales, purchase price allocations — and what becomes of credit carryforwards, 174 balances, and depreciation history at closing.
Start here
1 piecesNo background assumed — the pieces that build the foundation.
The working layer
6 piecesThe practitioner's day-to-day rules, mechanics, and traps.
Brief · Working · 3 min
Escrows and basis at closing: when held-back proceeds become income
Indemnity escrows are usually taxed as installment payments when released, with an imputed-interest slice — not at closing. But the details turn on who owns the escrow, whether the seller elects out of Section 453, and what claims actually get paid.
Brief · Working · 3 min
Credits and carryforwards at exit: what survives the closing
NOLs, research credit carryforwards, and Section 174 R&E balances survive a stock sale but arrive shackled by Sections 382 and 383 — and vanish entirely in asset deals. A structure-by-structure map and a diligence checklist.
Brief · Working · 3 min
Rollover equity taxation: deferring gain on the stake you keep
Sellers rolling 10–30% into the buyer's structure can defer tax on that slice through Section 721 or 351 — if the structure cooperates. Boot, blocker corporations, and QSBS preservation are where rollovers go wrong.
Brief · Working · 3 min
Negotiating the purchase price allocation: Form 8594, contested classes, and cost seg downstream
Buyer and seller must report the same Section 1060 allocation on Form 8594, but their interests collide on equipment, non-competes, and goodwill. How the allocation is fought, papered, and what it does to a later cost segregation study.
Brief · Working · 3 min
Installment sales in business exits: what Section 453 defers and what it doesn't
Seller financing spreads gain over the years payments arrive under Section 453 — but inventory, receivables, and depreciation recapture are taxed immediately, pledging the note accelerates it, and notes over $5 million carry an interest charge.
Brief · Working · 3 min
How earnouts are taxed: installment reporting, imputed interest, and the compensation trap
Earnout payments are usually contingent purchase price reported under the installment method with an imputed interest slice — unless the facts make them compensation, which the IRS and buyers each have reasons to argue.
Pro details
5 piecesSpecialist nuance: edge cases, interactions, and planning.
Guide · Pro · 8 min
QSBS exit planning: protecting the Section 1202 exclusion through a sale
Section 1202 can exclude tens of millions of gain from a qualified small business stock sale — but only if the exit is structured as a stock sale, the holding period is complete, and earnouts, escrows, and rollovers are handled with the exclusion in mind.
Guide · Pro · 7 min
Section 338(h)(10) and 336(e) elections: stock sales taxed as asset sales
A 338(h)(10) or 336(e) election lets a buyer acquire stock while both parties treat the deal as an asset sale for tax — buyer gets the step-up, seller reports asset gain. Here is who qualifies, how ADSP and AGUB work, and when sellers should demand a gross-up.
Brief · Pro · 3 min
Personal goodwill sales: the Martin Ice Cream route to a single tax
When a business's value sits in the shareholder's own relationships and reputation rather than corporate assets, the shareholder can sell that goodwill directly — capital gain, one level of tax, even out of a C corporation. The doctrine is real; the substantiation bar is high.
Brief · Pro · 3 min
Transaction cost treatment: what deal fees are deductible under the INDOPCO regulations
Treas. Reg. §1.263(a)-5 sorts deal costs into facilitative amounts that must be capitalized and everything else. The bright-line date, the 70% safe harbor for success fees, and who — buyer or target — gets what deduction.
Brief · Pro · 3 min
Pre-sale F reorganizations for S corporations: why PE buyers insist on them
The F-reorg structure — new holding company, QSub election, LLC conversion — gives buyers asset-purchase tax treatment and rollover flexibility without betting the deal on the target's S election history.