David A. Johnson Jr. and Mark D. Anderson Stress the Importance of Analyzing Tax Impacts of Deferred Compensation Before Transferring Partnership Interests in The Counselor

03.01.22

David A. Johnson Jr. and Mark D. Anderson recently published an article in the Illinois State Bar Association’s Business Advice & Financial Planning Section newsletter, The Counselor, outlining the necessity of purchasing assets only after substantial planning when deferred compensation is involved.

Throughout the article, “Planning Required When Sale of Partnership Assets Includes Deferred Compensation,” David and Mark refer to Hoops, LLC’s sale of the Grizzlies NBA franchise to Memphis Basketball, LLC. After initially including the $12 million of deferred compensation owed to two former players in its federal tax returns in the year they sold the franchise, Hoops amended that filing, attempting to exclude the deferred compensation from its return. The tax court system eventually ruled against Hoops, stating that, based on the timing of the deferred compensation payments, it was Hoops’ responsibility to include the deferred compensation in their returns.

David and Mark outline the importance of considering all aspects before acquiring or selling an asset involving deferred compensation including:

• Identifying these payments when analyzing sales tax implications
• Retaining liability and protecting deductions if a seller does not accelerate the payments
• Paying close attention to the time of the payments

Read the full article here.

David Johnson is a corporate attorney representing middle market, sponsor-backed companies from the initial platform acquisition through exit, and helps privately held companies selling to sponsor-backed companies. David also represents lead investors, family offices, and companies growing through venture capital investment or private offerings of debt and equity, and governance issues related thereto.

Mark Anderson represents real estate developers, privately held corporations, limited liability companies and family enterprises consisting of various corporations, LLCs and trusts in a wide range of tax and general business law matters. He also maintains an estate planning practice. Mark provides general business representation and tax and financing advice in connection with numerous business acquisitions and mergers, structuring of new business formations, long-term operating businesses and multi-family housing real estate developments, shopping centers and hotels.