Tax Receivable Agreement Calculation

كتب - آخر تحديث - 10 أكتوبر 2021

17 For the sake of simplicity, that example does not take account of the tempered sales rules of Article 453, according to which part of the TRA payments is to be regarded as assumed interest and not as an additional purchase price. While a typical TRA would provide that the benefit of an interest deduction is recognised in the calculation of benefits for a given tax year, a basic adjustment within the meaning of Article 743(b) (Step-up) should not apply to the amount of the share of interest calculated in the tra payment. Despite the complexity and burdensome reporting requirements, the value generated for both former partners and public shareholders can be so great that more and more companies are following this IPO strategy. However, in order to take full advantage of these advantages, it is important that the S-1 process, post-IPO accounting and early termination calculations take account of these additional complications. The Tax Receivable Agreement (TRA) is a contract between the former partners who sold their partnership shares and the new public company C Corp, which acquired the stake to share the value of the tax benefits resulting from the increased sale of the partnership shares. Typically, Legacy partners receive 85% of the Step-up`s tax savings and C Corp retains 15% of the value. A tra liability is recorded by C Corp for the 85% tax savings to be paid to former partners. An TRA is a legal agreement concluded between the public limited company and the former partners before the IPO. This first part deals with the basic structure of Up-C and how it is implemented contrasts with a traditional transformation of a partnership into a C Corporation and shows how an admissible tax agreement (TRA) associated with an Up-C can offer even greater value to the original partners (Legacy). Next month, the second part will analyze a wide range of tax considerations that can come into play with an TRA before, during and after the implementation of an Up-C structure.

As previously stated, C Corp records a TRA liability for future payments required by the TRA. This responsibility must be paid to the former partners, as C Corp obtains the benefits of the effective tax savings of the step-up. .