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The Tax Aspects of Acquiring a Business by W. Eugene Seago

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Chapter 1

The Purchase and Sale of an Unincorporated Business

The value of a business is the present value of the future net-of-taxes cash flows the business will produce. A tax adviser has little influence over the pattern of future revenues a corporation may earn, but the tax adviser may have some influence over the deductions allowed in calculating the taxable income. An important determinant of future tax deductions is how the purchase price is allocated among the assets.

Assets Valuations

The basic assets of an unincorporated business can be viewed as future tax deductions that will yield cash flow equal to the owner’s marginal tax rate in the year of the deduction multiplied by the amount of the deduction. The tax lives that are used ...

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