tax-law
Open transactions: how to get open transaction treatment in US tax law?
<p>In tax law class we said that getting open transactions is highly unusual; there are sophisticated ways of estimating future revenues so a truly indeterminate stream of revenue is not likely. But I asked my professor what's an example of something that would qualify for open transaction status today. He did not have an answer. </p>

<p>Any ideas?</p>

<p>Open transaction treatment is very rare because transactions structured completely openly are very rare. If they happen, it would be in an earn-out situation. For example, if you sell an asset in consideration for 10% of the revenues from the asset,to be paid to you until the time when the S&amp;P 500 index reaches 28,000 - you may get an open transaction since neither the time nor the amount of consideration may be determined at the time of sale.</p>

<p>As I said, it rarely happens. In most earn-out cases, there are pre-determined ceilings on on either the amount ("to a maximum of $XM"), or the time ("until the earlier of the S&amp;P Target Date or the 5-year anniversary of the sale") or both.</p>
