Corporation X purchases from Corporation Y, the entire stock of YSub, a wholly owned subsidiary (WOS) of Y, and pays a price representing the present worth of YSub. After the acquisition, YSub becomes a WOS of X, and X secures a cost basis in YSub stock. On the other hand, as there is no change in the ownership of YSub’s underlying assets, there is no basis step-up (or step-down) in those assets.
Buyers don’t often prefer this result as their purchase price recovery is pushed to the time of sale or other disposition of target’s stock, and there is no intermediate benefit as corporate stock is not depreciable or amortizable under US tax principles. As such, buyers, in general, prefer to acquire assets which allow faster purchase price
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The choice is exercised by making an election by filing a prescribed form with the Internal Revenue Service (“Service” or “IRS”). If the election is made, the acquired subsidiary secures a step-up (or step-down) in the basis of the assets. In effect, for the selling shareholder it is still a sale of stock; while for the purchaser it is in essence an acquisition of assets. Since the deemed sale is regarded only for federal income tax purposes, and not for other federal and state laws, the ownership of assets and contracts remains intact, thereby avoiding the complications of an actual assets transfer.
THE ELECTION
If within a period of twelve months, a corporation acquires from an unrelated seller in a taxable transaction, stock representing at least 80% of the vote and value of another corporation section 338 allows the purchasing corporation (and, in more limited circumstances, jointly with the selling shareholders) to irrevocably elect (“section 338 election”) that such stock acquisition be regarded as a purchase of the underlying assets for federal income tax purposes. The election is made by filing Form 8023 with the Service within 8½ months from the end of the month in which the acquisition was made.
LEGAL CONSTRUCT OF THE
This happens through a down-stairs merger. The remaining shell would be merged with Veritas and in exchange Seagate existing shareholders are distributed new Veritas shares proportionally. This unlocks the value of the shares without facing double taxation through the corporate tax of 34%. The existing shareholders only incur a personal capital gains tax on their investment holdings. The purpose of this part of the transaction is to successfully deliver the maximum amount of value from the appreciation of the Veritas stake to Seagate’s existing shareholders.
As for the combination of cash and new shares, shareholders can take part of their money
To meet the control test under section 351, a taxpayer transferring property to a corporation must by himself own 80 percent or more of the corporation 's voting stock and 80 percent of each class of nonvoting stock after the transfer even if there are
If this individual receiving all voting stock and then transfer to his children, he actually “control” the corporation and his children will have ability to “control” the corporation in fact. It will be qualified to recognize no gain or loss during the transaction.
* Under ASC 805-740, a change in an acquirer’s valuation allowance for a deferred tax asset that results from a change in the acquirer’s circumstances caused by a business combination…
Therefore, each partners’ distributive shares of income attributable to the transfer of all substantial rights to the patent would be considered proceeds from the sale or exchange of a capital asset held for more than 1 year.
A possible acquisition for Target would be the addition of Best Buy. Best Buy has been struggling as of late and has basically become a showroom for items that people will go elsewhere to purchase at a lower price. Best Buy suffers for its lack of variety and people will rather go shop at places such as Target and Wal-Mart. Target could also benefit from this merger by acquiring Best Buy’s brand presence and experience in selling electronics and appliances. Best Buy currently operates too many stores, and is in a dire need of a stronger presence online and has a dwindling reputation of taking care of its customers. It would be a good idea for Target to remake its electronics sections into Best Buy mini-stores and utilize its strengths in customer service to strengthen these departments. Replacing Best Buy larger stores could be smaller Best Buy locations in smaller towns and more strategic areas with the backing of a strong Target- Best Buy internet presence. Target could also utilize Best Buy’s biggest asset Geek
Section 351(c)(2) allows shareholders to dispose of all or part of the transfers stock without preventing the corporations Section 351 transaction from satisfying the “ control immediate after” requirement (4). Section 351(d) states that there are times when services, certain indebtedness, and accrued interest not treated as property as per James v. Commissioner, 53 T.C. 63 (1969); cf. Hospital Corporation of America v. Commissioner, 81 T.C. 520
d. A parent exchanges its ownership interests or the net assets of a wholly owned subsidiary for additional shares issued by the parent’s less-than-wholly-owned subsidiary, thereby increasing the parent’s percentage of ownership in the less-than-wholly-owned subsidiary but leaving all of the existing noncontrolling interest outstanding.
This report will be based on the Target Corporation, and will consist of two sections: 1) long-term financing policy and capital structure, and 2) an acquisition analysis. The first section will include: Target's most recent long-term financing decision; an analysis of the economic, business, and competitive background in which the financing occurred; Target's book value and market value; possible changes that would occur to Target's finance policy and capital structure if it was forced to consider re-organization and bankruptcy strategies; and finally discuss Target's international investment and financing
Target Corporation has recognized itself as one of the top retailers in the United States market on the basis of excellent service quality, customer experiences, operational excellence, strong financial position, and a wide array of product offerings. Through its high degree of service orientation at physical outlets and adoption of fair business practices, Target Corporation has become the most distinctive retailer in the eyes of its potential customers. Being one of the top-notch retailers in the United States, Target Corporation has to carefully strategize on its business operations and marketing tactics so as to keep itself in the row of competitive brands of the industry.
There may be differences between the assigned values and the tax bases of the assets and liabilities recognized in a business combination accounted for as a purchase under APB Opinion No. 16, Business Combinations.
Target Corporation was incorporated in Minnesota in 1902. Target operates large-format general merchandise discount stores in the United States, which include Target and SuperTarget stores.
Target knows their customers want merchandise on the shelves. Target is always working on sourcing and adjusting their supply chain to make sure production, quality, capacity, pricing, and
* The acquirer is the combining entity that obtains control of the other combining entities or businesses.