Business, Investment & Transactional Tax

“The professionalism and expertise that Caplin displayed in our matter gave us confidence in their ability to handle many other complex tax issues. [The . . .] team focused on providing exceptional client service, which is so very important when choosing to work with a law firm or any consulting firm. They seem to have a wealth of resources within their firm to consult on difficult and complex tax matters. From the top down, they are very professional and I will continue to consult with [them] on issues going forward due to their expertise and excellent client service.”  Client Commentary, Chambers USA

Caplin & Drysdale has broad experience advising business entities and their principals in tax planning with respect to both their operations and their transactions. Clients include domestic and foreign manufacturing and service companies, fund managers, financial institutions, and insurance companies. The firm regularly advises with respect to corporate tax, partnership tax, subchapter S, the taxation of executive compensation, the taxation of financial products, the taxation of regulated investment companies and real estate investment trusts, the taxation of insurance companies and products, the taxation of royalty streams, tax accounting and payroll and other withholding taxes. 

Areas of Focus

Structuring of Strategic and Financial Transactions

Both operating businesses and private equity funds need to structure their acquisitions and divestitures with an eye to U.S. federal, state and local tax consequences. Our experience with tax-free corporate reorganizations, taxable acquisitions, like-kind exchanges, installment sales, and debt restructurings is both broad and deep.

Caplin & Drysdale advises clients on the most tax efficient means of achieving their goals taking into account the relevant operational, financial, accounting and regulatory priorities and constraints. When transactions or investors cross international borders, Caplin & Drysdale brings to bear its considerable experience with U.S. tax treaties and the U.S. taxation of foreign investors and investments and its extensive network of relationships with tax advisors throughout the world.

More so than in many other jurisdictions, clear and contemporaneous documentation is crucial as it relates to U.S. tax matters. Clients must know the tax consequences from the outset, not discover them when the year-end accounting is done or tax returns prepared. Even standard organizational documents can present traps for the unwary. Amorphous doctrines such as "substance over form" and “economic substance,” as well as a variety of statutory and regulatory anti-abuse rules add further complications. Transactions and legal entities may be characterized differently for tax purposes than under non-tax law or in other jurisdictions. 

Formation and Structuring of Investment Funds and Their Management Entities

We have structured hedge funds, private equity funds, venture capital funds and real estate funds and have helped them assess the tax consequences of buying, holding and selling their investments in financial instruments, portfolio companies and other assets. We have particular experience in the application of U.S. tax treaties to these situations. We assist fund management companies in structuring their operations and help them address complexities that arise when these entities operate in multiple jurisdictions. We have extensive experience in designing equity participation plans for the investment professionals of fund management companies, in assisting them when partners join and leave, and in planning for generational shifts.

Structuring of Business Operations

The choice of legal entity and the manner of its capitalization must be made with an eye to the tax status and future plans of its owners.  In cross-border situations, hybrid entities – those treated differently in different jurisdictions – may be appropriate. Caplin & Drysdale has extensive experience with these issues in a variety of circumstances.

Caplin & Drysdale advises a wide range of businesses, however structured, on the taxation of their day-to-day operations. We have substantial experience with a broad range of tax accounting, executive compensation, and tax compliance issues that arise in the domestic and cross-border context, including withholding and reporting obligations for cross-border payments, the complex rules applicable to deferred compensation, and the applicability of U.S. tax treaties.

Disputes and litigation with departing employees, partners, investors, and deal counterparties are a fact of business life. Many times these disputes involve or are informed by tax or partnership accounting issues. Moreover, the tax consequences of damages and settlement payments need to be considered in resolving these disputes. We have extensive experience in advising claimants, defendants, and their attorneys on these issues.

Insurance Companies and Products

Caplin & Drysdale advises life insurance companies and property and casualty insurance companies on a broad range of issues, including company-level tax issues under subchapter L of the Internal Revenue Code, subpart F issues for controlled foreign corporations that are insurance companies, and the U.S. taxation of U.S. and foreign policyholders of life insurance, annuity, and accident and health insurance contracts.

Structuring and Operating REITS

REITS can provide a tax-efficient means of investing in real estate on either a standalone basis or in combination with an investment partnership. Caplin & Drysdale helps investment professionals tailor REITs and REIT-focused joint ventures to their specific circumstances and operate in compliance with IRS guidelines. We have extensive experience with the issues arising from the interaction of the REIT provisions and the partnership provisions of the Code. We have advised clients on the formation, restructuring, and operation of private REITs and on structuring exits from a REIT or its underlying properties.  We have particular experience advising foreign investors, including foreign pension plans and sovereigns, on the use of REITs to minimize exposure to U.S. net income and withholding tax on their U.S. real estate and mortgage loan portfolios.