News / March 23, 2020 Tax and Corporate Structuring Series of Emails

By Ryan Gardner
Monday, March 23, 2020

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Every Monday for the foreseeable future, involve certain tax and corporate structuring and other legal topics and advice that could be very valuable to you and/or your clients. These emails will focus principally on current economic issues and decisions that businesses throughout the State of Texas and the rest of the United States, are already facing or likely will soon begin to face, primarily as a result of:

  • the collapse in oil prices and the ripple effect thereof
  • the crippling effect that the “coronavirus” is having in most sectors of the global economy.

These economic forces and events are causing most people to consider many of those sayings from past generations, such as “you better save, you don’t know what will happen tomorrow.” Hopefully, you have followed some of those financial instructions or suggestions from prior generations. Although neither of the authors of this email can predict what will happen in the future, the purpose of these emails is to provide you with key tax and corporate information that might be just as valuable and timely as the advice provided by those past generations. Each of the authors of this email looks forward to having the opportunity to work with you in order to assist you and/or your clients through these challenging times.

The authors Brandon Jones and Ryan Gardner, have the following work and educational histories/backgrounds:

Brandon Jones
BBA in Accounting (1997), Texas A&M;
MBA and JD (2000), Baylor;
LLM in Taxation (2001), New York University; and
19 years working for national/global law firms (tax and corporate practice)

Ryan Gardner
BBA in Accounting (1990), UT Austin;
5 years in public accounting;
3 years in banking;
Master of Taxation and JD (2001), Baylor;
LLM in Taxation (2004), Houston;
10 years working for national/global law firms (tax and corporate practice); and
9 years practicing law in his own firm

We have had the opportunity to work at some of the largest national and global law firms in the world. The opportunity to do so has allowed each of the authors to work on many large and sophisticated business acquisitions/dispositions, joint ventures and other transactions. In addition, each of the authors also has significant experience assisting clients with the tax and corporate aspects of business recapitalizations and restructuring matters, making each of the authors very familiar with many of the issues likely to be faced by numerous businesses during this economic downturn.

The topics that are expected to be addressed in future emails include or relate to the following:

  • Freeing up/strengthening cash positions, with discussion topics that include:

delaying IRS filing and payment obligations;
loan modifications;
partial cash out of equity via a loan;
pulling cash out of business more tax efficiently;
preparing for the “bottom” and using freed up cash to purchase distressed businesses;
choice of business entity for tax minimization; and
utilizing self-charged rentals to create tax deductions without offsetting income inclusions;

  • Business recapitalization in connection with new equity capital infusions (i.e., third party bail outs), with discussion topics that include:

tax free capital contributions under 721, 351 and 368;
preferred returns and economic priorities;
why all those tax provisions are important and the devil is in the detail;
debt infusion and limitations;
governance and operational aspects inside operating agreements or shareholder agreements; and
buy-sell provisions in the operating agreements or shareholder agreements;

  • Restructuring debt capital, with discussion topics that include:

debt forgiveness and conversions, and related 108 exclusions to income;
752 debt allocations of recourse and nonrecourse debt and related effects (including deemed tax distributions);
preserving valuable tax assets (net operating losses, tax credits, etc); and
creditor issues;

  • Structuring business exits/sales, with discussion topics that include:

confidentiality agreements;
letters of intent (LOI);
stock sale vs. asset sale;
purchase price allocations;
reps/warranties and general covenants;
indemnifications, escrows, holdbacks, etc.;
noncompetition, nondisclosure and nonsolicitation agreements;
promissory notes, security agreements and guarantees; and
operating agreements, operational control, buy-sell provisions, and other issues relating to rollover transactions;
Estate planning opportunities – now may be a good time!

Each of the authors looks forward to sharing these insights with you over the coming weeks and months. Please do not hesitate to reach either one of us to the extent that you have questions or concerns about any other topics/issues noted above. 

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