Stock versus Asset Acquisition - SOLUTIONS

55m 10m 245m distribution 755m tax basis of stock

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Unformatted text preview: eds ($10m) less Asset Basis ($1m) = $9m Gain NOL Utilization - $9m Gain - $2m NOL = $7m $7m Gain X 35% Tax Rate = $2.45m Corporate Federal Tax ii. Compute the federal income tax of the shareholders Liquidating Distribution = $7.55m ($10m - $2.45m) Distribution ($7.55m) – Tax Basis of Stock ($3m) = $4.55 Gain Gain ($4.55m) X LTCG Rate (20%) = $0.91m Individual Tax b. Buyer i. List the tax basis in the assets acquired Assets: Tax Basis (STEP UP IN BASIS) Cash $ 100,000 Inventory $ 900,000 Goodwill $ 9,000,000 Total $10,000,000 ii. Indicate the amount of NOL that will carry over to the buyer NONE – no carry over of NOL in an asset purchase 3) Recommendations a. What deal would you recommend to the seller? Buyer? SELLER – STOCK DEAL – Less overall tax and...
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This document was uploaded on 04/08/2014 for the course ACCOUNTING 165 at University of Florida.

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