@article {Diehl45, author = {Kevin A. Diehl}, title = {How a Tax Rule Can Enable Greater Due Diligence Before Fully Consummating a Private Equity Deal}, volume = {21}, number = {1}, pages = {45--47}, year = {2017}, doi = {10.3905/jpe.2017.21.1.045}, publisher = {Institutional Investor Journals Umbrella}, abstract = {Before engaging in a private equity deal, significant time and money are expended in due diligence. However, the most important and informative item to consider is generally overlooked: the corporation{\textquoteright}s income tax returns. Yes, tax returns are usually confidential, but Internal Revenue Code {\textsection} 6103(e)(1)(D)(iii) allows a corporate shareowner who has but 1\% ownership to request a copy of the company{\textquoteright}s tax return directly from the Internal Revenue Service. Thus, if all the other due diligence checks out, the final step should be to acquire a 1\% interest to be able to view the corporation{\textquoteright}s tax return. Tax returns are the windows to the souls of corporations. What accounting financial reporting can hide cannot be hidden in a tax return to the federal government. Private equity deals would be safer with this information under wraps. No insider-trading charge should accrue, but the possibility of this claim should be weighed as a cost against this benefit.TOPICS: Private equity, legal/regulatory/public policy, portfolio construction, accounting and ratio analysis}, issn = {1096-5572}, URL = {https://jpe.pm-research.com/content/21/1/45}, eprint = {https://jpe.pm-research.com/content/21/1/45.full.pdf}, journal = {The Journal of Private Equity (Retired)} }