DTL created in M&A + taxable income questions
Hi guys,
When Bidder acquires Target company above book value, Target assets are adjusted to their Fair Value thanks to write-ups/downs. I understand that under Stock Purchase, DTLs are created as Tax accounting doesnt allow for these assets write-ups to be used to lower the taxable income. Book and Tax books should converge over time.
However, 1. Wouldnt Bidder benefit anyways from higher D&A post transaction from tangible assets purchased which in turn would lower taxable income? (but no tax benefits from Intangibles and Goodwill in the case Bidder is a public company) 2. In case Bidder is a private company, it can amortize goodwill under GAAP, so doesnt that also reduce taxable income? 3. If I got 1 & 2 right, wouldn't that mean that Private companies benefit the most from doing M&A as they can claim higher D&A from assets AND amortize goodwill?
Thanks much!
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