Value of Tax Liability Insurance for Complex Transactions
The complexity of tax legislation creates uncertainty for taxpayers. Legislation and accompanying guidance can often lack clarity when applied to complex transactions, while some matters may depend on the vagaries of judicial (or tax authority) interpretation. With tax compliance firmly in the spotlight, taxpayers seeking certainty can utilize tax liability insurance as a useful tool to help reduce exposure to a specific, identified tax risk.
Tax liability insurance is a product that allows the taxpayer to obtain cover for a potential tax liability. Tax insurance can be underwritten for a variety of transactions, whether in a mergers & acquisitions context and when no third parties are involved, such as group reorganizations or fund wind-up transactions. Insurance can help lessen financial exposure, as well as minimize valuable management time that may otherwise be tasked with resolving a tax issue arising on the transaction.
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