Why is it important to hire and maintain adequate tax staff?
It would be wise and necessary for companies to ensure that they have adequate tax staff for many
different reasons. This is due to tax laws constantly changing and being added, so it would be wise
for companies to ensure they have associates to keep tax laws up to date within the firm. Now when
we investigate mergers and acquisitions, it is known that most of the time, tax staff are normally a
part of determining synergies, pretax benefits, and after-tax benefits as well as improving multiple
processes within the business. Another thing, with mergers and acquisitions, there is known to be
different reporting requirements that would need to be caught in time to prevent escalation. If the
company did not have adequate staff through mergers and acquisitions, then the company could
face major setbacks and could even destroy a deal.
What importance does tax planning provide during a sale or acquisition of another company?
A company would need to begin tax planning at a very early stage when a sale or some form of
acquisition goes down within a company. If a company was to do this, it would be considered
beneficial because the company would potentially be able to leverage for potentially more
favourable tax results. An example would consist of a company being able to make different tax
elections within the company. It would also be wise for all tax planning to include all the company’s
transaction structuring options to help the company generate cash flow benefits.
The example that was proposed for this discussion has made me think a good bit about the
acquisition that the company I work for made a few months ago. First off, I work for an S crop, so
Sec. 269 does not apply to our situation (Knight &Knight, 2021). Under Sec. 1366 and 1377(a), an S
crop is allowed to claim the losses as if it had separate tax years before and following the
redemption of shares (Knight & Knight, 2021). I can see from this example alone how important it is
to have knowledgeable individuals on staff or on retainer to keep this information straight. We
purchased a smaller electrical contractor in order to get some tax savings but to also be able to get
more contracts in that area. The strongest reason for this company was the tax savings though as
they had been struggling for several years even when they had more work than they could keep up
with. I can see that if we were a C corporation, we would need to have adequate tax staff on hand in
order to make sure that our ducks were in a row. Having a solid list of reasons for purchasing or
merging companies is necessary in order to keep the IRS from denying the tax break. While we have
a very experienced CFO, I do not believe he has participated in many acquisitions so there could
have been some issues with the acquisition. We had a few lawyers and a CPA firm involved and I feel
that was the best course of action for our company to take.
Tax planning is extremely important for any merger or acquisition as it can result in either a tax
liability or tax credit, depending. a taxable merger is one where both companies assume tax liability
(Newburn, 2022). These taxes can be gains on capital, stock, or assets acquired during the merger
(Newburn, 2022). In planning a merger, one would need to review the capital, stocks, and assets to
see how much this could cost the companies during the merger. If these tax liabilities are too high,
the corporation could investigate a different route such as reorganization (Newburn, 2022). As there
are many implications that those not commonly working with mergers or acquisitions may not be
aware. A good example of this needing not only planning but also someone that is knowledgeable
on the workings of a merger or acquisition is how to handle the straddle period of a merger
(Newburn, 2022). While staff accountants might be able to handle many different aspects of the
merger, one that is knowledgeable of the finer details can also allow for some tax savings during the
planning period.
Knight, R.A., & Knight, L.G. (February 1, 2021). Acquiring the tax benefits of a corporation. Journal of
Accountancy. Retrieved https://www.journalofaccountancy.com/issues/2021/feb/tax-benefits-of-a-
corporation.html
Newburn, R.M. (July 26, 2022). Structuring M&A Deals Around Tax Implications. Retrieved
https://www.newburnlaw.com/structuring-ma-deals-around-tax-implications
Beckey, P., Call, R., Houser, C., Tarrant, S. (2017). Tax Considerations During M&A
Integration.Retrieved 9/25/2020
fromhttps://www2.deloitte.com/content/dam/Deloitte/us/Documents/mergers-acqisitions/us-ma-
tax-considerations-during-m-and-a-integration-shaping-the-new-organization.pdf
