Owner has two major routes to market, for one of these he has not been reporting the earnings on his tax returns for 4 years. It looks like the total cumulative profits from this were $1m EBIT, so his likely tax liability is ~$300k. His current contracts cannot be moved to another company, so a stock deal is the only way forward.
My proposed options:
a. Run
b. Remove the $300k from his cash purchase price and settle the taxes on acquisition - what would the be the potential penalties?
c. Hold the $300k in Escrow until the liability goes away.
What are the thoughts from the community?
How to deal with a tax liability?
by a searcher from INSEAD
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