In corporate dissolution cases, sometimes the pressure to get the deal done can lead to an impromptu buy-out settlement agreement being made in court and read into the record, without adequate consideration of the complexities and pitfalls involved in the transfer of shares and the consequences of default. A recent decision by Justice Darrell Gavrin in Matter of D’Angelo, highlighted in this week’s New York Business Divorce, provides a good example of the things that can go wrong.
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Tax analysis is a critical part of the business divorce attorney’s job when it comes to fashioning a shareholder buy-out agreement that, among other things, protects the selling shareholder from personal income tax liability on non-distributed or “phantom” net income that later may show up on the shareholder’s Schedule K-1. This week’s New York Business Divorce looks at a recent decision by Manhattan Supreme Court Justice Judith Gische in a fight over the tax consequences of a buy-out settlement of a corporate dissolution.

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