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Unformatted text preview: 50-30=$20M Taxes = gain x tax rate = 20M x .35 = $7M Target gets PP – taxes = $50 – 7 = $43M to distribute to target S/Hs. Then target has to pay individual taxes on their gain on their stock. 2,3) Asset Value written up to appraised value =$40M Goodwill = PP – Appraised value of assets = $50-40=$10M, amortized over 15 years for income tax purposes. C) Taxable offer buying stock i) Records assets at target’s BV 1) same as B(1) 2) Assets = target BV = $30M 3) No goodwill created. Target SHs pay tax at individual level. No tax advantage for Acquiring firm. ii) Records assets at target’s BV 1) This is where we are not sure – the textbook gives 2 different answers! p. 921’s example implies gain = PP – Appraised Value and p. 922 table says gain = Appraised Value – BV. So you won’t be tested on this part!!! 2) Assets = $40M 3) Goodwill created = PP-Appraised Value = 50-40=$10M...
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This note was uploaded on 05/10/2008 for the course FIN 374C taught by Professor Goldreyer during the Spring '08 term at University of Texas at Austin.
- Spring '08