Video Summary

In a taxable merger or acquisition, the acquiring company purchases the target company's assets, and the transaction is treated as a taxable event for both parties. This means both the target company and its shareholders will recognize capital gains or losses on the sale of assets or stock. The target company generally liquidates after the sale. The acquiring company will receive a stepped-up basis in the acquired assets, allowing for potentially larger depreciation deductions in the future. Tax implications can be complex, involving various taxes like corporate income tax, capital gains tax, and potentially state taxes. Careful tax planning is crucial before proceeding, to minimize the overall tax burden. This often involves structuring the transaction to optimize the allocation of purchase price among various assets. Professional tax advice is highly recommended to navigate the intricacies of taxable mergers and acquisitions.