Transactional Drafting: Tax

B709 is taught by T. Riffle

The focus of most business lawyers is documenting the purchase, sale or other combination of two or more businesses. Different transaction structures have evolved to address the unique circumstances of each transaction and to balance the varying interests of the parties, often with the view of minimizing the tax costs and maximizing the tax benefits associated with the deal.

In the opening section of this two-hour course, students will be introduced to basic (and some not so basic) transactional structures and elections, and will explore the basics of tax free and taxable acquisitions. A key element of this section will be the identification of the tax drivers dictating acquisition structures, including potential amortization of purchased intangibles by the buyer, character of income and gain, pass-through status (or lack thereof) of the target, and use or preservation of the target s tax attributes. The writing focus of this first unit will be the preparation of sample interoffice memos to supervising attorneys, laying out options and recommendations for how best to structure a transaction from the viewpoint of the hypothetical client.

The second unit will focus on acquisition agreements and their various components (statement of the transaction, representations and warranties of the parties, covenants concerning conduct prior to closing, conditions to closing, survival of representations and warranties, indemnities, and post-closing conduct) from the unique perspective of the tax lawyer assigned to the deal. We will review the purpose and meaning of common tax representations, covenants and indemnities, and compare the adverse interests of the buyer and the seller in each. The writing component of the second unit will require each student to prepare a sellers draft of the tax representations, covenants and indemnities in a standard stock purchase agreement. Thereafter, a sellers side draft will be provided to the students, who will be asked to prepare buyer s tax counsel s comments to the sellers draft received. Evaluations will be based on both the initial sellers draft prepared by each student, as well as the buyer-side comments each student makes.

The third and final unit will address tax-based drafting issues associated with the preparation of partnership agreements and limited liability company operating agreements. The unit will include an overview of the purpose and meaning of the standard tax boilerplate and an introduction to drafting income and loss allocations that satisfy the substantial economic effect requirements of the Internal Revenue Code. Students will carry out a writing assignment in which they will prepare gain and loss allocation provisions intended to reflect a hypothetical economic arrangement.

The non-writing components of the course will include both lectures and Socratic analysis of hypothetical deals. Out-of-class readings will include both sample acquisition agreements and LLC operating agreements, together with brief descriptions of the uses and mechanics of common acquisition structures either drawn from the literature or prepared by the instructor. The library has reserved a copy of the Ginsburg, Levin and Rocap Mergers, Acquisition, and Buyouts as additional background reading for interested students.

The pace of the course will be dictated by the speed with which the key tax drivers (noted above in the description of the first section of the class) are mastered by the students. Because the instructor maintains a home just a few blocks south of Baier Hall, the instructor is able to offer weekly office hours at the law school (exact times and dates to be determined) for students who may require additional help in mastering the subjects.

Prerequisite: Introduction to Income Tax or comparable undergraduate work