The proper tax treatment of the assumption of deductible and nondeductible contingent liabilities' for both the buyer and seller in transactions involving taxable asset acquisitions is currently under debate. Case law precedents and the current state of the law are contradictory or, at best, uncertain. Authority on the buyer's side in particular is undefined and authority on the seller's side is sparse. From a tax policy perspective, it is desirable to avoid rules that yield inconsistent results. A healthy economy depends in part upon businesses being able to make decisions based upon expected tax consequences, and currently, a comfortable level of predictability is not available. Consequently, transactions involving contingent liabilities become riskier and therefore more expensive for the taxpayer. The result is that such improper tax treatment could delay or discourage transactions which are desirable from a business perspective or even vital to a business' survival.

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