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M&A Tax Issues, such as Taxation of Earn-outs


Earn-out Taxation

  • As a general matter, capital gain treatment is arguable if employee-shareholders collect earn-out payments based on their relative share ownership and regardless of their continued employment; with ordinary income being warranted if the payments substitute for salary or bonus payments, or are forfeited if employment terminates.
  • See this Fenwick Alert from 2014