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Four tax considerations for private equity firms making acquisitions

February 13, 2018 Article 1 min read
Authors:
Joanne Baginski Matt Petrucci
A successful acquisition should be cause to celebrate. But failing to correctly evaluate the target’s tax situation can be costly — especially in light of tax reform. Don’t overlook these four tax considerations. Read more at American City Business Journals.

Business people looking over paperwork at a desk.Private equity firms are on a buying spree as they seek to accelerate portfolio company growth amid a relatively slow-growing economy.

However, correctly evaluating the tax situation at the target company can be the difference between popping the champagne cork and being left with a headache that lasts for years.

This is particularly true given the impacts of tax reform. In the case of a pure asset acquisition, the opportunity to immediately deduct tangible personal property could really affect how purchase-price allocations are structured. And given the steep drop in tax rates for C corporations from 35 percent to 21 percent for years beginning in 2018, the choice between using a pass-through entity — an LLC, usually, or a C corporation — is more complex than it has been in the past.

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