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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
July 23, 2010
Maybe you’ve never applied the term "narcissist" to someone with whom you were trying to do a business transaction or trying to sustain a business relationship that was already in place. If so, maybe you’ve never tried to do business with someone who believed that his interests were the only ones that counted.
Well, I haven’t been so fortunate.
Consider an example: Let’s call him "Bill". Bill says that he thinks I’m wonderfully capable, and everything indicates that he is being truthful: that really does seem to be his opinion. In the beginning days of our business relationship, I can do no wrong; in his eyes, I’m perfect. During these early days, his compliments toward me, his encouraging words and his acts of generosity produce a strong sense of loyalty on my part, and anticipation that this business relationship will be enduring and wonderfully beneficial.
Then I begin to see some fragile points in the relationship. When the first area of disagreement arises and negotiation over it is required, I observe an emotional component that I hadn’t seen before. I begin to see that this isn’t just about business; it’s about Bill’s sense of self-importance, which my disagreement with him seems to him to call into question. He seems to think—and may even say—that the important thing is whether our deal makes him look good. Metaphorically, he’s always holding up a mirror to check.
Next I begin to see that this business relationship, as Bill sees it, is one in which I am required to be his ally, but he is not required to be mine. I am expected to defend him to others, but he won’t pay me the same compliment, because doing so would, in his eyes, cost him some of his pre-eminence. I am expected to carry the load for our business transaction or business relationship, and the sole measure of my success in doing so is on-going benefit to him.
Here’s my first take-away from this: If you are contemplating a business transaction or business relationship with someone who is unwilling to commit, right from the start, to the deal in concrete ways that require him or her to participate in the burden as well as the benefit, stop right there. There’s a big red flag waving, and the deal won’t end well.
Here’s my second take-away, from this and other experiences: It is at least as important to know when not to do a deal as it is to know when to do so. Never ignore the red flags. It’s better to miss a good opportunity that it is to take up a lousy one.
What’s your experience?—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.