Stock versus Asset Acquisition

The shareholders basis in the stock is 3 million qz

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Unformatted text preview: he assets or stock of QZ Corporation for $10 million. Seller Information: 10 Shareholders own 100% of QZ Corporation. The shareholders basis in the stock is $3 million. QZ Corp has no liabilities and a $2 million Net Operating Loss (NOL) from the previous year. Below are the assets of QZ Corporation Assets: Book/Tax Basis Fair Market Value Cash $ 100,000 $ 100,000 Inventory $ 900,000 $ 900,000 Goodwill $ 0 $ 9,000,000 Total $1,000,000 $10,000,000 Requirements: 1) Stock Acquisition a) Seller i) Compute the federal income tax of the corporation ii) Compute the federal income tax of the shareholders b) Buyer i) List the tax basis in the assets acquired ii) Indicate the amount of NOL that will carry over to the buyer 2) Asset Acquisition a) Seller i) Compute the federal income tax of the corporation ii) Compute the federal income tax of the shareholders b) Buyer i) List the tax basis in the assets acquired ii) Indicate the amount of NOL that will carry over to the buyer 3) Recommendations a) What deal would you recommend to the seller? Buyer? b) Would your answer change and why if the QZ corp had a $10m NOL? c) If the companies could not agree on an asset/stock deal, how might they reach a compromise?...
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