Acc 331 disc 3-1

Discussion 3-1 Sale of Assets The pros of structuring a sale of a business as a sale of assets include the buyer being able to choose which liabilities they will assume and buyers can also choose to not buy certain assets (Rosendahl, 2020). A con for the buyer includes transferring certain assets can create questions about legal ownership, assignability, and third-party consent. Obtaining these consents can take time which can delay the transaction (Rosendahl, 2020). Sellers do not typically like structuring the sale of a business as a sale of assets because this includes higher taxes for them, especially if the selling company is a C Corp, then the seller faces double taxation. The pros for a seller in this scenario include having leverage for negotiating a higher sale price due to these higher taxes (Rosendahl, 2020). Stock Transaction The pros for a buyer when structuring a sale of a business as a stock transaction include the 338(h)(10) election which allows the buyer to treat the transaction as an acquisition of 100% of the assets for tax purposes, only if the buyer has 80% or more of the target corporation (Rosendahl, 2020). This election provides great tax savings for the buyer. Cons for the buyer in a stock transaction include lower depreciation expense which could lead to higher taxes than if they did an asset sale (Rosendahl, 2020). Buyers also take on more risks with a stock transaction of a business. Sellers typically prefer stock transaction because it is simpler, include lower capital gain tax rates and corporate-level taxes for C Corps are bypassed. Sellers also can potentially avoid responsibility for future liabilities unless the buyer insists the seller assumes these responsibilities (Rosendahl, 2020). Rosendahl, M. (2020). How To Structure the Sale of Your Business: Asset or Stock. How to Structure the Sale of Your Business: Asset or Stock ( less
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