RSM424H1 Lecture Notes - Lecture 18: Tax Deferral
11 Jun 2017
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Chapter 18 business acquisitions and divestitures assets versus shares. The decision to sell or acquire an existing business is subject to a number of different influences. While business acquisitions and divestitures can take many forms, there are only two fundamental options the sale of specific business assets or the sale of the corporation that owns those specific assets. Example: shareholder x owns 100% of the shares of for sale corporation, which operates an active business. For sale corporation owns a number of assets, which may include inventory, land, buildings, equipment, goodwill, patents, and franchises. Shareholder y owns 100% of buyer corporation, which also operates an active business. Corporation wants to buy the business operated by for sale corporation: there are two basic possible ways to transfer for sale"s business to buyer corporation. Shareholder x to sell the shares of for sale corporation to buyer corporation. In this case, payment of the purchase price will flow directly to shareholder x.
