Tax Due Diligence – Tax Due Diligence Is Crucial to the Success of a Business Sale
Tax due diligence is often omitted when preparing for the sale of a business. Tax due diligence results can be crucial to the success or failure of a business deal.
A thorough examination of tax laws and regulations can uncover potential deal-breaking issues before they become a problem. They could range from the fundamental complexity of a business’s tax situation to the nuances of international compliance.
Tax due diligence also looks at the possibility of a business creating a an taxable presence in another country. For instance, a business in a foreign jurisdiction can create local taxation of excise and income taxes, and even though there’s a treaty between 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 process We analyze the planned deal and the company’s prior disposal and acquisition activities and also review the documentation on transfer pricing for the company and any international compliance issues (including FBAR filings). This includes analyzing assets and liabilities’ underlying tax due diligence in tax preparations basis and identifying tax attributes that could be utilized to maximize value.
Net operating losses (NOLs) can occur when the deductions of a business exceed its tax-deductible income. Due diligence can help to determine whether these NOLs can be recouped and if they can be transferred to the new owner as an offset or used to reduce tax liabilities following the sale. Unclaimed property compliance is a different tax due diligence item. While not strictly a topic of tax taxes, tax authorities in states are becoming more scrutinized in this field.
