A uniquely qualified dealer in capital assets
Toll Free: 866-345-7561 - Email Us
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
December 20, 2010
In the direct transaction simply between the two of them, that can’t happen. That is reality.
But what if the seller sells—call this "Transaction #1"—to a capital-assets dealer who makes some changes in the structure of the deal and then, in a separate transaction, sells—call this "Transaction #2"—to the ultimate buyer? Ah, now that’s a different reality.
If, for example, Transaction #1 can be structured in a way that reduces the seller’s tax because of the deal, and Transaction #2 can be structured in a way that reduces the buyer’s tax cost in succeeding years, it may be possible for the seller’s after-tax proceeds to be exactly what the seller wants, and for the buyer’s after-tax cost to be exactly what the buyer wants.
A re-structuring transaction such as this is what is called a "price-reconciliation transaction", or "PRT". A PRT resides in a new reality in which two transactions occur, with no inherent reason why they must be alike each other.
Because price discrepancy between seller and buyer may be the single greatest barrier to successful selling and buying today, a PRT analysis should be done virtually every time you or a client of yours considers selling or buying. If you don’t include a PRT analysis, you are just throwing away your money or your client’s money.
A qualified capital-assets dealer should be able to provide such an analysis at no cost or obligation. If you ask for a PRT analysis and the dealer doesn’t know what that is, you may want to turn to someone who does.—Stan Crow
Share Article On LinkedIn:
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.