M&A Boot Camp booklet 2023 - Flipbook - Page 23
Illustrative comparison of the federal
income tax consequences of a stock sale
with the federal income tax consequences
of an asset sale ($20,000,000 Gain)
Assumptions | Target Balance Sheet
Assets
Factory (at cost basis)
$80,000,000
Value of Factory
Liabilities and Equity
Mortgage
Capital Stock
Total
$70,000,000
$10,000,000
$80,000,000
Stock Sale:
Gross Amount Realized by Stockholders
Basis of Stock
Gain Recognized by Stockholders
Capital Gains Tax
Net Amount Realized by Stockholders
Asset Sale:
Gross Amount Realized by Target
Basis of Factory
Gain Recognized by Target
Corporate Tax
Net Amount Realized by Target
Mortgage
Net Amount Available for Distribution
Basis of Stock
Gain Recognized by Stockholders
Capital Gains Tax
Net Amount Realized by Stockholders
Summary:
Net Amount Realized by Stockholders
Total Tax
As a Percentage of Gain
Basis of Factory for Depreciation
$100,000,000
Value of Target Stock
$30,000,000
Corporate Tax Rate
21.00%
Individual Capital Gain Tax Rate
23.80%
$30,000,000
$10,000,000
$20,000,000
23.80%
$4,760,000
$25,240,000
$100,000,000
$80,000,000
$20,000,000
21.00%
$10,000,000
$15,800,000
23.80%
$4,200,000
$95,800,000
$70,000,000
$25,800,000
$3,760,400
$22,039,600
Asset Sale
Stock Sale
$25,240,000 $22,039,600
$4,760,000 $7,960,400
36.12%
23.80%
$80,000,000 $100,000,000