I have a park under contract to buy on land contract(closing march 31st), the seller called me today and said that if he sold the park under land contract that he would have to pay 115,000 in depreciation and taxes and Im only putting 50k down. The company that owns the park is a corporation and he suggested to buy the shares of the company instead of just buying the park. would doing a master lease with the option to purchase be a better route for me versus’ buying his shares? My worry is that if i buy his shares one day when i sell ill have to pay all his depreciation and also i wouldnt be able to depreciate the assets cause this owner has owned the park for 57 years. Any ideas? or has anyone ever ran into this.
The thing I would worry about is that when you buy the corporation you are not only buying the park but also the liabilities of the corp. That of course includes anyone suing the park for something that happened before you bought it.
Is the seller basing this on sale of entire purchase price or installment sale ? I would verify they have the correct info , involving an accountant could be beneficial.
As @Randy_CA points out, be very careful of assuming the liabilities – known and unknown. I once worked for a homebuilder that upon entering a new market, acquired some assets but mostly the brand name of a another builder who was well established in that new market. Well, for years afterwards we were faced with lawsuits from that builder’s old projects. Not exactly the same situation with you, but just the same, i would be very careful.
I’ve bought shares instead of assets in the past, begrudgingly, due to tax issues. In that case, I had the purchase price adjusted to compensate me for my loss of future depreciation related tax savings and had the seller carry insurance for prior acts for two more years.
Wholly agree with Randy, Nick, Marvel… get a CPA involved and get a defense and indemnification agreement signed by the seller for prior acts.
2 Likes