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Corporate Tax > Class 5-9 Notes > Flashcards

Class 5-9 Notes Flashcards

0
Q

Asset acquisition

A

Company buys certain agreed upon assets

Direct purchase of assets

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1
Q

Reorganization

A

Entity trying to emerge as future taxable entity

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2
Q

Stock acquisition

A

1 company acquires the stock of another company

Buying out ownership interest

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3
Q

3 types of stock acquisitions

A

1 stock acquisition with no liquidation
2 stock acquisition with liquidation
3 sec. 338 deemed sale election

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4
Q

Stock acquisition with liquidation: when is it tax free?

A

Parent must own 80% of subsidiary for the liquidation

To be tax free

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5
Q

Sec. 338 deemed sale election

A

Combination of stock acquisition and asset acquisition

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6
Q

In a stock acquisition, what is the acquirers basis in the target stock

A

Basis in target stock = acquisition cost

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7
Q

When are target corporations ripe for acquisitions?

A

When they are struggling financially

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8
Q

When is the premium paid for a target corporation lost

A

When the acquirer owns less than 100% of the target corporation

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9
Q

Section 338: exchanging stock for stock and partial liquidation, when is it advantageous?

A

Advantageous when NOL, because it offsets gain coming in

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10
Q

In the year of acquisition, what is the goal of section 338?

A

Create tax favorable environment to save employees jobs,

So they can keep paying taxes

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11
Q

In section 338 what happens to a target company’s tax elections?

A

They go away

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12
Q

If the majority of an acquisition uses cash and debt…

A

It is usually taxable for the target corporation

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13
Q

Stock for stock transactions, how are they treated tax wise?

A

Qualify as non taxable event at shareholder level until stock is sold

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14
Q

What does goodwill get tested for?

A

Impairment

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15
Q

Transferor

Transferee

A

Transferor = target corporation

Transferee = acquiring corporation

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16
Q

Which bankruptcy proceeding involves a surviving entity?

A

Ch. 11 bankruptcy

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17
Q

Merger vs. consolidation

A

In a merger 1 company liquidates

In a consolidation both companies liquidate and a 3rd company emerges

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18
Q

What is important to track in mergers and acquisitions? 3 things

A

1 adjusted basis in assets
2 debt forgiven
3 impact on shareholders equity

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19
Q

Consideration

A

Anything of value

Ex. Cash, property, future promise, foregoing a right of privilege

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20
Q

What is a stock for stock acquisition like compared to individual taxation?

A

Like a like-kind exchange but at the corporate level

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21
Q

In a stock for stock acquisition a company can…

A

Continue and not be liquidated

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22
Q

Bankruptcy

A

Court approved plan

23
Q

3 types of court approved reorganizations

A

1 split off
2 spin off
3 split up

24
Q

Split off

A

Parent transfers assets to controlled subsidiary in exchange
For subsidiary’s stock

The parent converts the subsidiary’s stock to parent stock
And distributes it to shareholders

25
Q

Spin off

A

After transfer of asset, give subsidiary’s stock to shareholders

26
Q

Split up

A

After transfer of asset, give 2 or more subsidiary stocks to
shareholders

27
Q

Divisive G Reorganization

A

Transferor corporation may continue in business or be liquidated
Based on what court decides

28
Q

IRC and bankruptcy court have requirements to…

A

Avoid taxation

29
Q

In chapter 7 the government is trying to create an environment for business where…

A

They don’t have to fear tax transactions during mergers and

Acquisitions

30
Q

Attribution, example

A

Carries over

Ex. Wife participates in what husband does

31
Q

When is there no change in basis

A

No change in basis when there is nontaxable transfer of assets

32
Q

Taxable business combination

A

Acquirer spends less cash by using debt

33
Q

What is the point of reorganization under bankruptcy?

A

Give a troubled business a chance to be viable

34
Q

When can bankruptcy be declared?

A

When insolvent

35
Q

Insolvent

A

Debt exceeds assets and cashflow

36
Q

How often is basis in partnership and S-corporation adjusted?

A

Adjusted on annual basis

37
Q

Liquidating

A

Corporation is distributing assets other than retained earnings

38
Q

Consolidated

A

Multiple corporations filing 1 return

39
Q

Capital ex.

A

Land and building

40
Q

Selling inventory to a 3rd party

A

Completes transaction

41
Q

Inventory sale is deferred when…

A

Sold to subsidiary in affiliated group

42
Q

Tax advantages from 80% ownership interest

A

100% tax advantages

43
Q

Company that acts like apparent provides what to a subsidiary?

A

Management services

44
Q

When subsidiary depreciates inventory…

A

It triggers recognizing gain or loss

45
Q

What percentage of government revenue comes from corporate income tax?

A

10% government revenue

46
Q

What is the underlying concept in the tax code and the key to everything?

A

Basis

47
Q

What is the basis for salary and wages and dividends?

A

$0

48
Q

In an individuals life, what basis is disallowed?

A

training or college degree to get a job

49
Q

What is the basis of operational income?

A

$0

50
Q

Company assets that produce operation income have…

A

Basis

51
Q

What is essential for an acquisition plan to be executed?

A

Must be in writing and all parties must agree

52
Q

NOL comes into existence when…

A

Deductions exceed gross income

53
Q

When is NOL most advantageous?

A

In onetime non recurring loss

54
Q

Tax deferral gives the tax payer what?

A

Time to plan taxes well

55
Q

What makes an acquisition make sense? 2 things

A

1 courts look for acquisition that allows target corp to continue to
Operate

2 licenses and contracts that continue because corp continues
To operate

Corporate Tax (23 decks)

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