Tax implications of liquidating a corporation Portali con cam chat

17-Apr-2020 15:59

The purchaser, on the other hand, may not want to purchase stock because, except as described in I.a.3. A stock sale may be effected by a direct purchase and sale of the stock of the Company or by a “reverse subsidiary merger.” In a reverse subsidiary merger, the purchaser forms a transitory subsidiary, capitalizes the transitory subsidiary with the purchase price (which may include borrowed money if the purchase will be leveraged), and then merges the transitory subsidiary into the Company.below (“Stock sale treated as asset sale”), a stock purchase has no effect on the tax bases of the Company’s assets. When the dust settles, the selling stockholders have the purchase price, and the Company is owned by the purchaser.Often, what is good for one party to the sale is bad for the other.The structure of the sale, therefore, is often driven by the relative bargaining positions of the parties and, in any event, may affect the price paid by the purchaser.The purchaser, on the other hand, is deemed to acquire a “new” Company with stepped-up asset bases.The election may be disadvantageous to the Company’s stockholders for the reasons noted under “Asset sale” above (possibility of ordinary income and, if the Company holds assets with built-in gain subject to tax under Code Section 1374, double-taxation).

tax implications of liquidating a corporation-6

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Further, this capital gain realized by the shareholder can be offset or lowered if the shareholder has other capital losses.The purchaser, on the other hand, will likely want to allocate as much purchase price as possible to assets that are eligible for bonus depreciation (or have short depreciation or amortization schedules) or that are likely to turn over in the short term.