2013 Morning Q1C - liquidity requirement

Why isn’t the taxes due immediately on the gain of the sale of the business is not liquidity requiremnet?

Is it becaue it can be paid directly from the proceeds of the sale?

I would assume that’s why.

Good question I had the same issue when I solve it but then remembered that you will get the proceed net of tax so no need to have tax(liquidity set aside).

I even didn’t think about that till I read the answer.

I made the same mistake… have you seen any other questions that actually do require you to set aside the capital gains tax as a liquidity requirement? Or should we just always exclude it and assume that it is not a liquidity requirement?

if it is an unrealized capital gain that gets taxed annually it will trigger a liquidity event

I think you really have to exclude it - I made the same mistake.

Here’s my reasoning:

If you count the taxes as a liquidity requirement, you’d also have to count the proceeds as a liquidity event, which would mean that because you have $x million from proceeds, there are no liquidity requirements, because the $x million can cover it.

See what I mean?

yep I like it, good reasoning

bah theres one of these little interpretation issues in almost every IPS question which throws me