No clear-cut answers to the tax-affecting dilemma
Abstract: Pass-through entities — such as partnerships, S corporations and limited liability companies — aren’t subject to corporate-level income taxes. Instead, their income “passes” onto the shareholders’ personal tax returns based on their respective equity interests in the company. But is this favorable tax treatment valuable in the eyes of hypothetical investors? Tax-affecting remains a controversial topic that requires careful consideration when one is valuing these types of businesses. This article discusses how different courts have been handling the issue.