Basic tax issues in acquisition transactions

By Michael L. This article discusses basic U.

basic tax issues in acquisition transactions

It is intended primarily for readers who are corporate lawyers rather than tax lawyers. The discussion is written in general terms and does not include every exception to the general rules and exception to exception, and so on. Most importantly, it is vital for the corporate lawyer to consult a tax lawyer at every stage of an acquisition transaction.

The tax rules are detailed, often counterintuitive, and always changing. Details that are minor from a corporate point of view, such as which corporation survives a merger, can have vast consequences from a tax point of view. The particular structure of a transaction can mean that one party might achieve a significant tax benefit at the expense of the other party e.

It is also essential that the tax lawyer begin to participate in a transaction at the very beginning. This is usually when the basic structural elements of the transaction are determined. It is much easier to propose a particular structure at the time an initial term sheet is being negotiated than it is to propose a change in structure after both sides with or without their respective tax lawyers have agreed to it.

Likewise, detailed ongoing participation by the tax lawyer is necessary to be sure that changes in documentation do not change the tax results that are important to the client. Penn State Law Review. Comments: Penn St. Submissions Symposia The Forum Blog. Basic Tax Issues in Acquisition Transactions.Please contact customerservices lexology. There are, however, common tax implications at play in most transactions of which purchasing and selling entities should consider, as these tax implications may guide significant aspects of negotiation in the deal.

A stock sale takes place between the purchaser of the target company and the shareholders of the target company, not the company itself. Therefore, the target company does not recognize any corporate-level gain. This is beneficial for the target company and its shareholders, as the transaction only receives single taxation at the shareholder level and avoids potential double-taxation involved with asset sales - once at the corporate level and once again at the shareholder level.

In a stock sale, however, neither the purchaser, nor the target company, receives any stepped-up basis in its assets. Asset sales, on the other hand, provide the purchaser with a favorable step-up in the depreciable basis in the acquired assets to fair market value.

Sellers, however, often experience unfavorable tax treatment in an asset sale for two primary reasons.

Marketing salary australia job salary search

First, if the entity being sold is a C corporation, the seller will typically be subject to double taxation, as the corporation is taxed on the gain from the sale and the shareholders are then taxed on any proceeds they receive individually. Additionally, if the company is an S corporation but was formerly a C corporation, there is a year tax recognition period for built-in gains "BIG"and a sale during that period could subject the seller to corporate BIG taxes.

Second, although sales of capital assets are generally taxed at lower capital gains rates, such capital asset sales may be subject to depreciation recapture taxed at ordinary rates, and non-capital assets may be taxed at ordinary income tax rates as well - both resulting in increased tax liability for the seller.

Subject to a myriad of requirements, IRC Section allows for C and S corporations to participate in a "tax-free reorganization. The minimum value of stock compared to the total consideration paid by the buyer to the seller in a tax-free reorganization is 40 percent. As a general rule, if the target has net operating loss carryovers, tax credit carryovers or a high tax basis in its operating assets, a tax-free reorganization or a stock transaction may be more advantageous than an asset purchase.

However, the acquiring entity needs to consider the potential impact that IRC Section may have on the ability of the acquiring entity to utilize and benefit from the target company's tax attributes. If the target company is an S corporation, a partnership or a limited liability company, IRC Section gh 10 or in the case of a partnership elections may still allow for the tax basis of the assets to be revalued - even in a stock transaction.

While the aforementioned tax elections are particularly valuable to the acquiring entity, they often create a heavier tax burden for the seller and impact negotiations accordingly. SALT implications often vary from jurisdiction to jurisdiction. SALT issues can also enter the fray when a buyer expands the reach of the company through the transaction. As the geographical footprint of the company expands into other jurisdictions, so does the potential SALT liability in those jurisdictions.

If the expansion reaches into states and other jurisdictions in such a way that creates "nexus" a substantial economic connectionthe SALT rules for those jurisdictions must additionally be considered. As a result, during the due diligence and planning stage of a transaction, it is important to consider whether the transaction will create nexus with new states and expose the acquiring entity to SALT in those new jurisdictions.

Several states impose successor liability for sales, use and employment taxes when an acquiring entity purchases all or s substantially all of a selling entity's assets.Merger and acquisition activity has been brisk in recent years. From a tax standpoint, a merger or acquisition can basically be structured in two ways:. Stock or ownership interest. Reasons : The corporation will pay less tax and generate more after-tax income. A buyer can also purchase the assets of a business. This may happen if a buyer only wants specific assets or product lines.

For several reasons, buyers usually prefer to purchase assets rather than ownership interests.

Speech impairment stutter children statistics

Therefore, buyers are concerned about limiting exposure to undisclosed and unknown liabilities and minimizing taxes after the deal closes. A buyer can step up increase the tax basis of purchased assets to reflect the purchase price. Stepped-up basis lowers taxable gains when certain assets, such as receivables and inventory, are sold or converted into cash.

It also increases depreciation and amortization deductions for qualifying assets. Meanwhile, sellers generally prefer stock sales for tax and nontax reasons.

One of their main objectives is to minimize the tax bill from a sale. That can usually be achieved by selling their ownership interests in a business corporate stock or partnership or LLC interests as opposed to selling business assets.

With a sale of stock or other ownership interest, liabilities generally transfer to the buyer and any gain on sale is generally treated as lower-taxed long-term capital gain assuming the ownership interest has been held for more than one year.

Keep in mind that other issues, such as employee benefits, can also cause unexpected tax issues when merging with, or acquiring, a business. After a deal is done, it may be too late to get the best tax results. We can help with tax planningbusiness valuation and mergers and acquisitions. Contact us for the best way to proceed in your situation. Skip to content Check us out on BrokerCheck. Stocks vs.

Buyer vs. Stay up to date on the latest news and such Subscribe.Risk Return and Gambling Market Efficiency (PDF).

basic tax issues in acquisition transactions

Oklahoma City, United States: Oklahoma State University. Retrieved 20 July 2015. African Divination Systems: Ways of Knowing. Despite predictions that the store would fail, it has done very well. The figures and statistics are used for the prediction of future economic trends.

Due Diligence During the M\u0026A Process - Part 1

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'prediction.

Test your vocabulary with our 10-question quiz. Explore the year a word first appeared Definition of prediction 1 : an act of predicting 2 : something that is predicted : forecast NEW. Take the quiz How Strong Is Your Vocabulary. Take the quiz Word Winder's CrossWinder A game of winding words. A prediction is what someone thinks will happen.

A prediction is a forecast, but not only about the weather. So a prediction is a statement about the future. A fortune teller makes a prediction using a crystal ball. A meteorologist uses maps and scientific data to tell us about the possibility of rain, snow or sunshine.

And when I made the prediction that you would understand what this word meant, it was based on instinct, a gut feeling telling me what would happen next.

Whether you're a student, an educator, or a lifelong learner, Vocabulary. Don't have an account yet. It's free and takes five seconds. Europe's elite club competition is back and starts tonight when Glasgow face Montpellier in what will be a thrilling game to kick off Round 3. Other big matches see Toulon host Bath, La Rochelle take on Wasps, Exeter face Leinster and a repeat of last season's final taking place at Allianz Park between Saracens and Clermont.

Incredibly Saracens enter the game on the back of five successive losses in all competitions. That game isn't where our focus lies though as we pick out Munster against Leicester as the battle for top spot in Pool 4 heats up with a mouth-watering clash. Remember, this is when extra spice is added, as next week these sides all face each other again in reverse fixtures.

Munster, now under Johann van Graan, face Matt O'Connor's side at Thomond Park with both teams locked on six points despite Munster having drawn and won a game to Leicester's one win and a defeat.

That means the pool is far from over as Racing 92 and Castres remain in the mix. Leicester head to Limerick on the back of a 32-25 loss at Wasps while Munster impressed in their 36-10 victory over the struggling Ospreys. Van Graan has inherited a strong squad that has a perfect mix of youth and experience and despite ongoing speculation surrounding the likes of CJ Stander and Peter O'Mahony's future, Munster's focus will be centred on claiming yet another European home win.

James Hart has been playing very well of late but a returning Conor Murray's quality should give the Irish province greater direction at the base and we expect them to be too much for their English visitors.Very top-heavy structure with hardly any engineers and far too many senior engineers, managers and team leaders. No room for growth any more despite more staff being looked for and desks already shrinking in order to fit people in.

How Taxes Factor into a Merger and Acquisition Transaction

Ridiculous parking situation means you need to add another hour or two to your day in order to secure a space and queue to get out. Far too many people, not enough space anywhere. Feedback on issues ignored, preferential treatment given to some staff, 30 minute lunch break, no flexibility in working hours. A heavy focus on your failures and a complete ignorance on any achievements you have made.

Basic Tax Issues in Acquisition Transactions

No work life balance. Treated like a number. Expect to get there at 8AM to park and leave after 6PM with just 30 minutes break. You are ignoring and demotivating very talented staff whilst rewarding and promoting people who are incapable. Stop promoting those who are friends with management.

Competitive salary, many holidays, great working hoursHiring practices need to be improved as incompetent and low-skill staff is being recruited Helpful (2)I worked in the testing department which is ran on scripts.

Many people from the team have migrated from the business with no technical knowledge so they follow these scripts merrilyExpect to be ridiculed in front of others, don't talk to a developer.

basic tax issues in acquisition transactions

Why can't you talk to the lady who owns bet 365 when you see her. Why can't you talk to developersWhy do you not know till 530 you are needed to work late. Why treated like children on the test team. Disaster management and the office is so boring.

Not the best IT company for motivated peopleSome managers are not qualified for the role. And the green politic in the office is very bad(too much paper in the office)Good salary for the location, good team, free tea and coffee brought to your desk.

Rotas can often lead to working 10 hour shifts back to back on weekends, and also can end up working 10 days straight. Promotions work on a 'who you know' basisfast paced and dynamic company to work for, recently improved benefits packages available to all levels within IT, plenty of internal or self paced web based learning. Teams took part in a Christmas Jumper Day - along with a bake-off and raffle - for the Staffordshire-based charity. The Ambassadors are already planning the next round of fundraising events.Before pursuing any financial strategies discussed on this website, you should always consult with a licensed financial advisor.

Facebook Twitter Google Plus Youtube Linkedin Instagram Menu Palatin Technologies stock analysis: Palatin, one of the best biotech stock after expansion to Asian market November 23, 2017 This article was written by David Borenstein, a Financial Analyst at I Know First, enrolled in the double major in Economics and Business undergraduate program at the Interdisciplinary Centre, Herzliya.

November 19, 2017 The article was written by Aline Rzetelna, a Financial Analyst at I Know First. Foot Locker Strategies I Know First Bullish Forecast on FL Read The Full Premium Article Subscribe to receive exclusive PREMIUM content Here DSW FL Foot Locker LULU NKE Premium premium article stock forecast stock prediction UAAPremium Qualcomm Stock Prediction: Qualcomm Heavily Investing In Technological Breakthroughs November 19, 2017 The article was written by Aline Rzetelna, a Financial Analyst at I Know First.

Summary: Artificial Intelligence and the Financial Sector IBM's Watson Supercomputer BlackRock Landing On Artificial Intelligence UBS AG Implementing Artificial Intelligence Solutions JPMorgan Deploys Mosaic Smart Data For Fixed Income Trading Business I Know First Artificial Intelligence Algorithm Read The Full Premium Article Subscribe to receive exclusive PREMIUM content here algo-trading algotrading Artificial Intelligence Blackrock Goldman Sachs I Know First IBM ibm watson supercomputer jpmorgan Machine Learning in Finance Premium premium article stock market trading UBSAlgorithmic Articles Premium How To Recognize A Stock Market Bubble Before It Bursts November 10, 2017 Tali Soroker is a Financial Analyst at I Know First.

Read The Full Premium Article Subscribe to receive exclusive PREMIUM content Here algorithmic predictions housing crisis market bubbles stock market bubble stock market crashAlgorithmic Articles Premium Top 3 Stock Valuation Methods Plus the Algorithmic Valuation Tool November 5, 2017 Tali Soroker is a Financial Analyst at I Know First.

Read The Full Premium Article Subscribe to receive exclusive PREMIUM content Here multiple valuation methods Stock Valuation stock valuation methods valuation methodsAlgorithmic Articles Premium AMAT Stock Forecast: AMAT Delivers Best Quarter in its 50-Year History and It Is Just The Beginning October 29, 2017 The article was written by Aline Rzetelna, a Financial Analyst at I Know First.

AMAT Stock Forecast Summary: Record Results for AMAT in the Third Quarter of Fiscal 2017 New Era of Artificial Intelligence Business and Financial Outlook for the Upcoming Periods I Know First Bullish Forecast on AMAT Read The Full Premium Article Subscribe to receive exclusive PREMIUM content Here algorithm performance algotrading AMAT Artificial Intelligence Premium premium articlePremiumPages:1234567. Detailed information on the use of cookies on this Site, and how you can decline them, is provided in our cookie policy.

By using this Site or clicking on "OK", you consent to the use of cookies. Our mission is to help leaders in multiple sectors develop a deeper understanding of the global economy. Our flagship business publication has been defining and informing the senior-management agenda since 1964. Article - McKinsey Quarterly - October 2016 Chinese consumers: Revisiting our predictions By Yuval Atsmon and Max Magni Chinese consumers: Revisiting our predictions Article Actions Share this article on LinkedIn Share this article on Twitter Share this article on Facebook Email this article Download this article As their incomes rise, Chinese consumers are trading up and going beyond necessities.

In 2011, we tried our hand at predicting the ways in which, in the decade to come, Chinese consumers would change their preferences and behaviors. This article takes stock of those predictions. Why check in now. Another is a comprehensive new McKinsey survey, which follows nearly ten years of previous research that includes interviews with more than 60,000 people in upward of 60 cities in China.

Mathematically non trivial 4th birthday wishes

Deeper and more nuanced understanding of Chinese consumers can help reveal fresh opportunitiesfor new entrants and incumbents alikeand signal those areas where established players may need to be more wary.

While geographic differences persist, Chinese consumers are, on the whole, more individualistic, more willing to pay for nonnecessities and discretionary items, more brand loyal, and more willing to trade up to more expensive purchaseseven as their hallmark pragmatism endures. Just as it was then, generalizing about Chinese consumers continues to be almost as difficult (and maybe as foolish) as it is to generalize about European consumers.

We predicted these differences would remainand even grow more significant, especially in the consumption patterns and tastes that relate to discretionary items.

To help companies better tailor their go-to-market approach, we grouped most cities in China into clusters based on their similarities, including their geographic proximity and the transportation infrastructure that connects them.

Furthermore, when our latest survey compared the consumers in the Shanghai area to those around Beijing and Hangzhou, certain spending attitudes also showed marked differences.Nordic Visitor did a great job putting the tour together. It was so awesome we want to book another trip soon. We can't thank you enough!. The accommodations were all very clean and the beds in all of them were very comfortable.

Hotel staff were always helpful. The range of accommodation from former boarding schools to new hotels was interesting in itself and the variety added to the tour. The meals provided were excellent and high quality.

There was also a delicious variety of food. Our guide was possibly the best guide I have ever had on a guided tour. He shared with us his enormous knowledge of Iceland and made every effort to provide us with an understanding of the geology, history and social development of Iceland. He had a great sense of humour and was kind and caring to everyone. I felt that the organisation by Nordic Visitor was excellent both before and during the tour.

There was always someone on the telephone to answer queries before I arrived in Iceland. There was a small change to our itinerary and great efforts were made to compensate for that with an extra evening meal and additional visit to a small farm as well as a trip on a trawler in the Western Fjords. These were much appreciated. My friend Lesley Hallett and I visited the Nordic Visitor Office in Reykjavik after our tour and were delighted to meet some of the staff.

Quotes in a essay how to cite

We recorded a short video of some of our immediate reactions to the tour. This was the first time I have used a travel company to plan and book our vacation. The process was very easy. It was well worth it. Our travel consultant, Helga G.

The itinerary was detailed and made it very easy for us to plan our day. The Welcome packet we received provided excellent information about various attractions.

Basic tax issues in mergers and acquisitions

The highlighted map that was provided was very handy in helping us find our way and manage our time. Even the people that transported us from the hotel to the airport were prompt and friendly.

Movie review editing services au

I never felt I had to worry about something going wrong with the travel plans. A year ago, we had used Nordic to book a trip to Iceland.


thoughts on “Basic tax issues in acquisition transactions

Leave a Reply

Your email address will not be published. Required fields are marked *