The Tax Man Cometh


Many of you probably remember the old Midas commercials where the mechanic says to a distraught looking customer, “You can pay me now … or you can pay me later,” suggesting to the customer that deferring the current repairs will result in a much larger repair bill at a later date.

With potentially significant tax increases on the horizon, it occurred to me that this is an appropriate adage for business owners who might be considering selling their businesses any time in the next several years.

Those of you that have read prior articles I’ve written for CryoGas International (see www.cryogas.com, search “deveaux”) know that when I advise business owners regarding the sale of their businesses, I urge them not to focus too much on the purchase price, but rather to focus on the after-tax proceeds they will receive from the transaction. In my last article, “M&A — Opportunity in the Midst of a Mess” (CGI, January 2009), I alluded to the possibility that future increases in tax rates could effectively negate any potential increases in the value of businesses for many years to come. With some of these potential tax increases seeming more certain, and the timing of certain specific tax increases looming at the end of 2010, this seems like a good time to expand on this subject.

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