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

280G Golden Parachute Rules

409A M&A Rules

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