Tax issue for an asset purchase
Hi,
I wanted to know if there is anyway to mitigate the tax issues resulting out of an asset transfer (buyout) of a C corp. Please help!
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Elect to receive stock instead of cash? Though this merely delays the time when the gain would be recorded.
Nope, a stock purchase is not an option. I meant for an asset purchase, there is a double whammy involved, one at the shareholder level, other at the corp level. Is there a way to structure the asset deal to mitigate this double troble!
To be fair, the target tax liability will be triggered by consideration used by the acquirer regardless of whether it's a stock deal or an asset deal. If acquirer with pays stock, it's likely to come up with a tax-free structure.
Is the target a subsidiary of a C-Corp or a freestanding C-Corp? If the former, you can negotiate with the seller to make a 338(h)(10) election, which the buyer will usually pay significantly more for. You'll still end up with the two levels of taxation at the target shareholder level, but your after tax wealth will be greater than just a normal C-Corp sale.
If this is a freestanding C-Corp, you're out of luck if target wants cash.
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