A contingent payment sale, also commonly called an earn-out deal, occurs when you sell the assets of your business or your business ownership interest and the total amount and/or timing of the buyer’s payments depend on the post-sale financial performance of the acquired business.
Put another way, an earn-out deal occurs when the sales price and timing of payments depend on factors that cannot be determined with certainty by the end of the tax year in which you make the sale. For example:
The earn-out depends on company growth after the sale.
The earn-out depends on a combination of growth and profits.
This article covers the most important things to know about the tax implications of an earn-out arrangement on the seller’s side of the deal. ... Log in to view full article.