Lecture 8 - Tax considerations in transaction are important...

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Tax considerations in transaction are important in knowing why a deal is done one way or another. To structure a transaction ask what is the legal form pass through entity? -Partnership, S corp., C corp. subsidiary of another corp. -it has income -Income is passed through to the owner (taxed once to the owner). -Profit on sale is taxed to partner not partnership 1986: There is double taxation C Corps: If there is an income, it is subject to operational tax. Then, if it goes to shareholders, they are taxed as well. • According to Badge: there is asset acquisition, stock acquisition, and merger. But, Martin thinks there are only 2 kinds: asset acquisition and stock acquisition. When smoke clears, target has disappeared, and buyer has all of the assets. discussed forward triangular mergers taxable transactions What are tax objective’s of partners Buyer’s objective: acquire assets of a target company with the most beneficial tax attributes as possible. If NBV < fair value, then buyer wants to take it with a stepped-up basis so they can claim tax
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