S Corp Acquisition

Question 0

B. How much cash after tax will company’s S/H have under structure (ii)?

Answer 0

1. Price - net tax basis
2. Tax using #1 = Separate ordinary and CG (less CLCF)
3. Price - tax

Question 1

A. How much cash ATAX will monterey’s shareholder have under structure (i)?

Answer 1

1. Price - net tax basis - CLCF * 20%

2. Price - tax

Question 2

C. Assume company is willing to pay x. What purchase price are they indifferent?

Answer 2

1. Calc difference from part a & part b
2. # 1/.8
3. # 2+ purchase price

Question 3

D. At what purchase price are they indifferent?

Answer 3

1. (Price - net tax basis * 35% * PV/yr)/ (1-35%*pv/yr)

Question 4

Which structure is optimal?

Answer 4

1. Part D - 1

2. Which is higher, #1 or purchase price?