What tax issues uncovered during tax DD can affect the FDD report?

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Sales tax

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Any tax exposure uncovered by tax due diligence should be considered indebtedness and funded by seller.

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How many deals are you getting full tax indemnities on? I am not seeing many these days at least for larger than 250m transactions where both sides have competent advisors.

Never seen a tax exposure affect Q of E. Indemnity, Escrow or PPR takes care of it.

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Limitation on use of NOLs or other tax attributes

How does that effect FDD report?

Indirect taxes can effect QOE, what else we got?

About half - anything we find on DD gets cut out of R&W insurance, which has largely replaced the role of tax indemnities. It’s pretty common to say we have a max exposure of say 5 million then depending how sure fire of an exposure it is the parties agree to what is basically a risk weighted value, say 3 million.

Ya I agree

Tax exposures may be added to debt like items/indebtedness depending on the buyers use of indemnities vs. RWI

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