An acquisition of a new company could mean new tax return filings. An understanding of each state’s taxing regime, separate versus combined state filing requirements, and blended state rate considerations (such as weighting methodologies, etc.) are items that should be considered not only for tax purposes going forward but also for tax accounting purposes. It is critical that an acquiring company understand the tax implications of an acquisition before attempting to structure the transaction. If the transaction is structured as a stock acquisition, the acquiring company has limited opportunity to mitigate associated tax liabilities other than through contractual indemnifications. In a taxable stock acquisition, the buyer acquires stock from the target company's shareholders, who are taxed on the difference between the purchase price and their outside basis in the target's stock. In a taxable asset acquisition, the selling corporation is taxed on the excess of the purchase price over its inside basis in the assets sold, and the selling corporation's shareholders are taxed on the distribution of sale proceeds. A stock-for-stock merger occurs when shares of one company are traded for another during an acquisition. When, and if, the transaction is approved, shareholders can trade the shares of the target 2012] BASIC TAX ISSUES IN ACQUISITION TRANSACTIONS 891. is the amount of the single tax that arises on either a stock or asset sale. If the Target is considered to sell assets, the taxable gain is based on the Target’s tax basis for its assets.
Taxable Stock Sales. A seller often prefers to sell stock, rather than assets, because it avoids the double taxation problem. The sale of stock does not result in a taxable gain or loss at the corporate level. A tax-free acquisition is the purchase of a target company in which the recognition of a gain can be deferred. The deferral of gain recognition is of considerable importance, since it delays the payment of income taxes . A proposed transaction must incorporate all three of the following conce
24 Jul 2019 Acquisition transactions can be structured as a taxable asset acquisition or a stock acquisition. In an asset acquisition, for U.S. tax purposes the 20 Feb 2019 Before you jump on the M&A bandwagon, it's important to understand how your transaction will be taxed under current tax law. Stock vs. Asset The answer for tax purposes depends on whether the acquisition is structured as a stock purchase or as an asset purchase (including asset acquisitions Acquisitions can also be effected by buying shares in a company, subject to foreign investment regulations. Purchase of assets. Purchase price. The cost base of 29 Apr 2014 of Tax Geek Tuesday, we addressed taxable mergers and acquisitions. Section 368(a)(1)(C): acquisition of target assets with stock of
There are two general taxable transaction forms—the stock deal and the asset deal. Stock—basis carryover: A stock acquisition generally refers to the acquisition of the ownership interest in a C corporation (or S corporation). An acquirer will receive a tax basis in the stock acquired ("outside basis") equal to the consideration paid. If the price being paid by Acquiring is all cash, the transaction can only be a taxable transaction. If a portion of the price being paid by Acquiring is stock of Acquiring, then it may be possible to structure the
There are two general taxable transaction forms—the stock deal and the asset deal. Stock—basis carryover: A stock acquisition generally refers to the acquisition of the ownership interest in a C corporation (or S corporation). An acquirer will receive a tax basis in the stock acquired ("outside basis") equal to the consideration paid. If the price being paid by Acquiring is all cash, the transaction can only be a taxable transaction. If a portion of the price being paid by Acquiring is stock of Acquiring, then it may be possible to structure the Taxable Stock Sales. A seller often prefers to sell stock, rather than assets, because it avoids the double taxation problem. The sale of stock does not result in a taxable gain or loss at the corporate level. A tax-free acquisition is the purchase of a target company in which the recognition of a gain can be deferred. The deferral of gain recognition is of considerable importance, since it delays the payment of income taxes . A proposed transaction must incorporate all three of the following conce