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176. Does an Installment Sale Defer the Tax on Recapture of Accelerated Depreciation? No. Can the Tax on Recapture of Accelerated Depreciation Nevertheless Be Deferred When an Installment Sale Occurs? Yes.
162. Transfer a Family Business to the Next Generation During the Parent's Lifetime, Retain an Asset for Income, Give the Transferee a Stepped-up Basis, Defer the Gain on Sale, Support the Parent with Deductible Rent, and Finance the Transaction, Too
August 20, 2013
Financial institutions and other regulated companies operate under complex due-diligence requirements that are generally referred to as "know your customer" rules. These rules aim to prevent, among other things, money laundering, fraud, corruption and tax evasion.
"Know your customer" due diligence is recommended, also, as just good marketing practice: to know your company’s customers and their needs and wants, so that your company’s marketing can be tailored accordingly. For example, see Forbes, June 14, 2012.
S.Crow Collateral Corp. applies our own version of "know your customer" in our buying and selling of capital assets. We call it "know our counterparty", and we apply it particularly to our prospective sellers (and expect them to do much the same, about S.Crow Collateral Corp.). What we’re looking for can be summarized as evidence that the situation is business-normal. By that, I mean that coherent, reasonable, verifiable and understandable information is readily disclosed about the seller’s identity, location and address; the seller’s legal and tax advisers and the broker for the deal; the seller’s history of ownership of the asset and reason for selling; the deal terms; and the ultimate buyer.
If something doesn’t make sense in the information that is provided, and the deficiency is not promptly corrected, S.Crow Collateral Corp. prefers to forego that opportunity and instead to move on to the next one.
Notice that I’m not saying that the deal terms, taken alone, must be what is usually done in that situation. After all, what S.Crow Collateral Corp. does is not, so far, being usually done. Instead, what I’m saying is that the proposed deal must be coherent, reasonable, verifiable and understandable—and therefore within the scope of business-normal—when all of the information about the parties and the situation is taken into account.
For those institutions and companies which are governed by "know your customer" due-diligence regulations, an important objective is risk management, including minimizing reputational risk. Those institutions and companies do their best to stay away from all likely risk. S.Crow Collateral Corp. is not governed by due-diligence government regulations, but we have the same objective: to avoid and minimize risk. That’s why we look for business opportunities in which everything about the prospective transaction is coherent, reasonable, verifiable and understandable, which is to say, within what is business-normal.
We expect and welcome our counterparties to approach us with similar care, because that, too, is business-normal.—Stan Crow
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The Latest Installment addresses situations, questions and issues which are brought to us in the course of the consideration, negotiation or execution of transactions. We don't use the real names of parties to transactions, and we may edit the statement of the question to try to tell the story better. Please feel free to comment, or to take issue, or to raise your own question or situation. If you do the latter, please do not relate any confidential information.
The Latest Installment blog is edited by Stanley D. Crow, who is president of S.Crow Collateral Corp.