The Tax Aspects Of Acquiring A Business [Paperback]

The decisions about whether to purchase a business and the price to pay is usually a matter of determining the present values of future cash flows and the availability of funds to acquire the business. Generally, each dollar of cash flow has an associated tax effect and therefore the numbers are meaningless if taxes are omitted from the calculations. Each dollar paid for the business will eventually become a tax deduction, either as an expense or recovery of capital investment. The present value of the benefit of the deductions or cost recovery depend upon when the tax benefit will be realized, the marginal tax bracket of the entity receiving the deduction and the discount rate assigned to the benefit. This book is intended to provide the tools to take into account the tax consequences of how the acquisition is structured. The acquisition may be a purchase of business assets, partners interests, or stock of a corporation, and may be undertaken by an individual, an existing business organization, or a newly formed entity. The consideration may be all cash, cash and debt, or equity interests. The tax consequences of the structure of the acquisition can vary widely, depending upon the form of the transaction. This book will provide a framework for analyzing the forms the transaction can take and the resulting tax consequences. As will be seen in this book, the old adage of substance over form often loses its significance in business acquisitions: Form matters. The audience for this book is graduate business students.