Hunting goodwill: Personal goodwill as property in corporate acquisitions

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Abstract

In today's economy, it's more important than ever to examine the tax planning strategies for any corporate acquisition. Poor tax planning for goodwill acquired in an unwise acquisition can lead to a loss in value overnight! And if that happens, a company may have to write it off against earnings. In the worst case, a company might have to write off most, if not all, of its goodwill.

So as more acquisitions of closely held entities occur, it's increasingly important to separate the intangible value of a company into enterprise goodwill versus personal goodwill. But it's a difficult challenge. What techniques or strategies will help?

This article has some answers. The author reveals the importance of the treatment of personal goodwill versus enterprise goodwill—for both the seller and the buyer. And the author also examines factors that should be considered when structuring such an acquisition. © 2012 Wiley Periodicals, Inc.

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