Clear and contemporaneous documentation is crucial as it relates to U.S. tax matters, more so than in many other jurisdictions. It is important to know the consequences of what you do before you do it, not when the year-end accounting is done or tax returns are being prepared the following year. Even "vanilla" organizing documents can present traps for the unwary. Shifting judge-made doctrines of "substance over form" and the like add further complications. Transactions and legal entities may be characterized differently for tax purposes than under non-tax law (or in other jurisdictions).
Negotiating with partners and counterparties is often a matter of separating the important from the really important, and being able to "look around" corners to see what construction not only the other parties but the tax authorities might be inclined to put on the transaction two, five, or ten years later. Caplin & Drysdale can both participate in the nuts and bolts of drafting and provide a "second pair of eyes" when needed.
- Entity governing documents
- Purchase and sale transactions
- Financing transactions
- A multinational is concerned that financing transactions contemplated by European affiliates could unnecessarily create "subpart F" income.
Result: Caplin & Drysdale works with foreign advisors on a restructuring that results in the participants becoming a single taxpayer for U.S. tax purposes, eliminating the potential concern.
- A corporation is concerned about protecting its rights to pending and contingent tax claims in a contemplated sale of a business.
Result: Caplin & Drysdale assists in negotiating a satisfactory tax indemnity clause.