When you are the preparation for a sale of a business, tax due diligence may seem like a last-minute thought. Tax due diligence results can be crucial to the success or failure of a business deal.
A thorough review of tax rules and regulations can URL uncover potential deal-breaking issues before they become problems. This can range from the complexity of a company’s financial situation to the specifics of international compliance.
Tax due diligence also considers the possibility of a business creating a an international tax-paying entity. For instance, a place of business in a foreign location could create local taxes on excise and income however, despite the fact that a treaty between the US and the foreign country could mitigate the effects, it’s vital to be aware of tax risks and opportunities.
As part of the tax due diligence workstream we review the proposed transaction as well as the company’s previous transactions in the areas of acquisition and disposal and review the documentation for transfer pricing and any international compliance issues (including FBAR filings). This includes assessing the underlying tax basis of liabilities and assets and identifying tax attributes that could be used to boost the value.
Net operating losses (NOLs) can result when the deductions of a business exceed its taxable income. Due diligence can be used to determine whether these NOLs are able to be realized and if they can either be transferred to an owner who is tax carryforwards or utilized to reduce the tax burden following a sale. Other tax due diligence items include unclaimed property compliance which, while not a specific tax issue is now becoming a subject that is being scrutinized by state tax authorities.
