|By PR Newswire||
|August 13, 2014 03:00 AM EDT||
WOODBURY, N.Y., Aug. 13, 2014 /PRNewswire-iReach/ -- Gettry Marcus CPA, P.C., a leading consulting, tax and forensic accounting firm, shares the results of a corporate restructuring case study conducted by the firm.
The firm was engaged by a shareholder of a domestic corporation (Corporation) that had two equal shareholders. The client, one of the shareholders, planned to retire and have his son continue in his capacity as the company's salesman and be able to purchase an equity position.
At the same time, the shareholders were approached by a private investment company (PIC) who was interested in purchasing a minority interest in the Corporation. The shareholders agreed to the sale of the minority interest in the Corporation. An additional relevant fact was that the shareholders and several related individuals owned the stock of a foreign-based corporation.
Gettry Marcus developed a plan to have the Corporation contribute its assets to a new company ("NEWCO") and have equity partners make capital contributions. In addition, NEWCO needed additional financing to buy the shares of the Corporation and also to buy the stock of the foreign corporation.
There were two complex issues Gettry Marcus' plan needed to address. First, a transfer of net assets or an exchange of shares between entities under common control is accounted for on a historical cost basis. The corporation would be transferring its net assets and its operation to NEWCO. Under accounting rules the two companies were considered to be held under common control.
Second, the bank financing the transaction wanted NEWCO to show a balance sheet with net worth that included the goodwill purchased. This was substantially greater than the contributed net assets and contributed capital.
The final results included the following. The firm's plan called for the formation of a Family Limited Partnership (FLP) that would own NEWCO, in conjunction with the PIC, and the two original shareholders. This structure allowed the creation of a defective trust and the gifting of stock by both partners. Further, the structure met accounting rules and allowed for the use of Fair Market Value (FMR) accounting rather than historical cost.
Ultimately, the new entities were formed in which the PIC, the FLP and the original owners held equity in NEWCO and meet the rules of not being considered under common control.
The IRS audited all aspects of the transaction and passed it without exception. This resulted in significant savings for our client and an effective corporate structure for NEWCO.
To view additional case studies, visit the Gettry Marcus website.
Gettry Marcus CPA, P.C. is a top New York City and Long Island CPA firm with offices in Woodbury, Long Island and New York City. We provide accounting, tax, and consulting services to commercial businesses, high net worth individuals and various industries, which include real estate and health care. We have one of the premier and most credentialed business valuation, litigation and forensic accounting groups in the New York Area. Our experience in diverse industries and a highly talented and experienced professional staff gives us the ability to share valuable insights into our clients' businesses, to better understand their goals and problems and to help them attain the vision they have for their company.
Gettry Marcus is "Always Looking Deeper" to build value for our clients.
Media Contact: Fayellen Dietchweiler, Gettry Marcus CPA, P.C., 516-364-3390 x 225, [email protected]
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SOURCE Gettry Marcus CPA, P.C.
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