Within a dispute between two business proprietors, they agreed, on a paper napkin at a restaurant, to end the conflict by one of them acquiring the share of the other, for hundreds of thousands of shekels, net, and left the attorneys to draft a formal agreement.
The meaning of signing on the napkin, whether the agreement went ahead and the agreed sum paid or not, is tax liability to a sum that was almost identical to the sum for which the deal was made – hundreds of thousands of shekels.
To prevent the need to pay tax, following the advice, a claim was filed to execute the contract – the paper napkin – based on the assumption that until the legal action started, there would be a chance for the agreement to be completed and the payment and the source for paying the tax being certain. If there would not be legal certainty for the payment the file would be manage seeking a lost result so that no tax liability would apply.
Income tax ended up submitting a payment demand, and then the legal action was explained to it, including the appeal, In the wake of the “failure” to secure a loss in the judgment in the first instance. Income tax acquiesced to wait until the end of the action. The goal was achieved in the second instance: a loss judgment and an exemption from tax on a deal that did not go ahead, without any need for exhausting discussions with the tax authorities.