CHAPTER 5
Unlocking Value Using Tax Structure
The hardest thing in the world to understand is the income tax.
—Albert Einstein
INTRODUCTION
The best things in life are free, but sooner or later the government will find a way to tax them. However, as the investment bank Morgan Stanley once pointed out in an advertisement, “You must pay your taxes, but there’s no law that says you gotta leave a tip.” So the goal for law-abiding (but sensible) dealmakers is to pay only what is due and no more. How to achieve this goal varies widely by situation. This variety, in turn, greatly affects the valuation of businesses—both before and after an acquisition.
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