In an asset acquisition, the buyer acquires the target company's assets, while in a stock acquisition, the buyer acquires the target company's stock. These structures have significantly different tax implications. Asset acquisitions allow the seller to deduct losses on assets sold and potentially recognize capital gains at more favorable rates, but also triggers tax liabilities on the sale of each asset. The buyer can depreciate the assets purchased, creating tax deductions. Conversely, in stock acquisitions, the seller typically recognizes capital gains only upon the sale of the stock, which may be taxed at a higher rate than the gains on individual assets. The buyer inherits the target company's tax basis, meaning they carry over existing tax attributes. The choice between asset and stock acquisitions depends on various factors, including the tax rates of the buyer and seller, the nature of the target's assets (e.g., appreciated assets, liabilities), and the seller's desire to recognize gains immediately versus deferring taxes. Tax professionals should be consulted to analyze the optimal structure given the specific circumstances.
Which acquisition structure allows the seller to deduct losses on assets sold?
In a stock acquisition, when does the seller typically recognize capital gains?
What tax benefit does the buyer typically gain in an asset acquisition?