The Cummings & Cummings Law Journal

Understanding the Distribution Waterfall in Real Estate Funds A distribution waterfall is the structured order in which cash flows from a real estate fund are allocated among investors and the sponsor. It specifies who gets paid, when they get paid, and how much, all based on negotiated economic rights embedded in the governing documents. In

Clarify What “Change of Control” Actually Means in Your Agreement In senior credit facilities, the definition of a “Change of Control” is not a mere formality. It is a negotiated construct that can be broader, narrower, or differently sequenced than corporate law concepts or stock exchange rules. A typical definition may include transfers of voting

Understanding the Excess Business Loss Limitation (IRC § 461(l)) Excess business loss rules under IRC § 461(l) restrict the amount of net business losses that a noncorporate taxpayer may use to offset nonbusiness income in a given year. The law aggregates all trades or businesses and compares total deductions to total gross income and gains

What Qualified Small Business Stock Is, and Why It Matters Qualified Small Business Stock (QSBS) refers to stock issued by a domestic C corporation that satisfies a series of requirements under Internal Revenue Code § 1202. When those conditions are met, individual investors may exclude up to 100 percent of the gain on sale, subject

Understanding the Role of a Management Agreement in a Nonprofit Subsidiary Structure Establishing a nonprofit subsidiary can be a prudent way to manage risk, segregate programs, or comply with regulatory requirements. However, once the subsidiary exists, the parent organization frequently wishes to centralize administrative, financial, and operational functions for efficiency. A well-drafted management agreement is

Tax-free reorganizations occupy a pivotal place in corporate law and federal taxation. Properly structured, these transactions can allow corporations and their shareholders to combine, separate, or realign businesses without immediate recognition of gain. However, “tax-free” is not a casual descriptor. It is a technical conclusion that rests on precise statutory pathways, strict regulatory doctrines, and

Understanding Private Annuities and Why They Can Defer Estate Tax Liability A private annuity is an agreement in which a property owner (the annuitant) transfers assets to a private party (often a child, family entity, or an intentionally defective grantor trust) in exchange for that party’s unsecured promise to make periodic payments for the annuitant’s

Defining a Matching Gift Program and Why “Simple” Is Not Simple Corporate charitable matching gift programs appear straightforward: an employer agrees to match employee donations to eligible nonprofits up to a set cap. However, that apparent simplicity hides a dense network of legal, tax, accounting, employment, and privacy considerations that vary by jurisdiction and program

Recognize When Adequate Assurance Is Appropriate Under the UCC Under Uniform Commercial Code section 2-609, a party that has reasonable grounds for insecurity about the other party’s performance may demand adequate assurance and may suspend its own performance if commercially reasonable. The threshold question is not academic. It is the foundation of whether your demand

Why Earn-Outs Demand Rigorous Legal Drafting Earn-out provisions are frequently described as bridges over valuation gaps, but in practice they are complex, high-stakes contracts that reallocate risk, control, and value long after closing. As an attorney and CPA, I find that many parties underestimate how the earn-out embeds ongoing commercial and accounting judgments into a

Understanding What Constitutes an Alternative Trading System Alternative Trading Systems are trading venues operated by registered broker-dealers that bring together multiple buyers and sellers of securities but do not set rules governing subscribers beyond the conduct of their trading on the system. In practical terms, an ATS can look like a “dark pool,” a crossing

Defining Earnings and Profits: The Foundation for Dividend Determinations Earnings and Profits (E&P) is a tax concept, not a book or GAAP concept. It measures a corporation’s capacity to make distributions to shareholders without impairing capital. For purposes of dividend determinations under Section 316, a distribution is a dividend to the extent of a corporation’s

  What a Blue Sky Memorandum Is and Why It Matters in Private Placements A Blue Sky Memorandum is a formal legal analysis that maps the complex web of state securities law considerations that apply to a particular private offering. While issuers frequently focus on federal exemptions such as Regulation D, state securities laws—colloquially known

Defining the Universal Successor in Civil Law Jurisdictions In civil law jurisdictions, a universal successor is the person or entity that steps into the legal position of a predecessor and acquires the entirety of that predecessor’s transmissible rights and obligations, either upon death, through certain corporate reorganizations, or other codified mechanisms. Unlike a particular successor

Understand the Taxonomy of Business Acquisition Costs Before You Allocate Them Properly allocating business acquisition costs begins with recognizing that not all costs are created equal for tax purposes. The governing framework is rooted in the capitalization regulations under section 263(a), particularly the so-called INDOPCO regulations. In broad terms, costs are categorized as: investigatory (generally

  Understanding Successor Liability Risk in Asset Transactions Acquirers often assume that purchasing assets rather than equity automatically eliminates exposure to the seller’s historical liabilities. That assumption is dangerously incomplete. Although an asset purchase agreement can reduce certain risks, common-law and statutory doctrines may still impose successor liability on the buyer. Courts in many jurisdictions

What the Centralized Partnership Audit Regime Actually Is The Centralized Partnership Audit Regime, commonly referred to as CPAR, is the post-2017 framework under which the Internal Revenue Service examines partnerships and adjusts items at the partnership level. Enacted by the Bipartisan Budget Act of 2015 and implemented for tax years beginning after 2017, CPAR replaced

Understanding the Core Structures: Cross-Purchase Versus Entity-Purchase Buy-sell agreements are designed to govern the transfer of ownership interests upon death, disability, retirement, or departure of an owner. Two dominant structures are the cross-purchase arrangement and the entity-purchase (or redemption) arrangement. In a cross-purchase, the remaining owners agree to purchase the departing owner’s interest directly. In

Corporate Bylaws and Operating Agreements: Why These “Internal” Documents Are External Risk Controls Contrary to a common misconception, corporate bylaws and limited liability company operating agreements are not mere formalities drafted once and filed away. These governing instruments operate as the internal law of your entity. They determine who may act for the company, how

Why an Operating Agreement Is the Constitution of a Multi-Owner LLC An operating agreement functions as the governing charter of a multi-owner limited liability company, setting out in enforceable terms how the owners will make decisions, share profits and losses, contribute capital, resolve disputes, and ultimately exit the venture. It is the controlling document that