Assumed Contingent Liabilities in Asset Acquisitions — New Tax Court Case: Corporate Taxation

By: William R. Skinner

Corporate Taxation published an article by Fenwick’s William Skinner that discusses a recent tax court decision concerning tax liabilities in asset acquisitions.

In Hoops, the Tax Court recently addressed a longstanding, unanswered issue: what is the treatment to a seller of assets, where the buyer assumes a contingent liability associated with the business? While the treatment of such assumed obligations to the purchaser of assets is well known, Hoops is one of the few cases that address the seller’s treatment. The last case to address this issue comprehensively arose prior to the Tax Reform Act of 1986 when old Section 337 allowed a C Corporation seller to dispose of assets without recognition of gain.

Read full article here.

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