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M&A – Watch Out for Unfavorable ‘Related Party’ Rules

Under the tax code, being a “related party” in business can be unfavorable in certain purchase-sale transactions. The problem is that the rules are not very well known, quite complicated, and reflect a notion of “related” that far exceeds what most people would have reason to suspect. These provisions can snare perfectly legitimate purchase-sale transactions that weren't concocted just to avoid taxes. We thought we would share this article which includes a rundown on how the rules can adversely affect dealings between individuals and entities if the parties involved aren't careful.

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