Final Stretch

Question 0

NOL part B: step 2: calculate tax cost

Answer 0

ADSP- net basis - NOL * .35

Question 1

NOL part a : remember

Answer 1

Multiply final year by first table

Question 2

NOL part b: step 3: calc tax benefit tax

Answer 2

(ADSP - net basis / amortization ) * .35 * PV (amort years, discount rate)

Question 3

NOL part b: step 4

Answer 3

Step 3-tax cost

Question 4

What adverse effect were some companies concerned about if and when president Obama and congress reduce corp tax rates?

Answer 4

Firms with DTA will have lower GAAP earnings if corp tax rates are reduced

Question 5

S corp v c corp: part c: what is the minimum price that target S/H will accept?

Answer 5

Price - S/H basis * .35 = tax at corp level

price - corp tax = S/H distribution

S/H distribution - S/H basis - NOL * .2 = S/H tax

S/H distribution - S/H tax = new price

Stock sale - new price /.8 /.65

Add answer to price

Question 6

Comparison of s and c corp: part d: minimum price s/h will accept under part b?

Answer 6

No 338= stock sale
W338:
1. price- s/h basis 
2. Separate OI (.35) and CG (.2) 
3. Price - taxes 
4. No 338 - w/ 338
5. 4. /.8
6. Add answer to 5 to the price

Question 7

S corp and c corp: part d: what is the minimum price that the target’s S/H will accept under part b?

Answer 7

No 338= stock sale
W338:
1. price- s/h basis 
2. Separate OI (.35) and CG (.2) 
3. Price - taxes 
4. No 338 - w/ 338
5. 4. /.8
6. Add answer to 5 to the price

Question 8

S corp to c corp comparison: how much more ATAX can of a corp get relative to c corp?

Answer 8

Same as D but use answer from part A to calc S corp.

S corp - c corp and you’re done