My December 27 nugget discussed changes made to the tax laws by the Tax Cuts and Jobs Act (“Act”) that could have a substantial benefit for sellers and buyers of businesses. However, not every provision of the Act is rosy for buyers of businesses. For example, the Act limits business interest that can be deducted. That means that not all interest paid on financing used to fund an acquisition may be able to be deducted from income. Also, the net operating loss rules have changed. The net operating loss deduction is now limited to 80% of taxable income and net operating losses can no longer be carried back to prior years. Although acquisitions are not often driven primarily by tax motivations, it is important to understand how the changes made by the Act will affect the taxes an acquirer will pay going forward.
ABOUT GLENN D. SOLOMON
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Glenn D. Solomon is a principal at Offit Kurman and has provided counsel to businesses and business owners for more than twenty-five years. He has extensive experience in the purchase and sale of businesses, structuring ownership agreements, and advising companies in financial distress.
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