文稿說明分析教案tax training21jan

1、Insert Client NameTax and Accounting Matters with Deal ImpactDateTRANSACTION SERVICESADVISORYThis document has not been risk reviewed. The information contained in this document is presented for example purposes only. This document is provided as a reference for layout, structure, and format. It sho

2、uld be tailored to the specific client needs and engagement objectives. This template should be modified for your specific client situation. Professional judgment, based on individual circumstances, must be used when considering the use of this template. DELETE THIS NOTEThis document may not be comp

3、liant with KPMGs Branding Standards. Please refer to Brand Central Web site ( ) or NDPPS for further information on how to comply with branding requirements. 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated wi

4、th KPMG International Cooperative, a Swiss entity. All rights reserved. Printed in the U.S.A. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity.1AgendalIntroductionslTax Structuring of TransactionslTax Matters with Deal ImpactlA

5、cquisition Accounting SFAS 141(R)lSPA Points and Contractual ConsiderationslWalk-Through of Project Silver Due Diligence Report 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperat

6、ive, a Swiss entity. All rights reserved. Printed in the U.S.A. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity.2With You TodayThe contacts at KPMG in connection with this presentation are:Top RowInsert NameTransaction Service

7、sPartner, New YorkKPMG LLPTel: Insert Phone NumberCell: Insert Phone NumberInsert Email AddressInsert NameM&A TaxPartner, New YorkKPMG LLPTel: Insert Phone NumberCell: Insert Phone NumberInsert Email AddressInsert NameNew YorkFinancial Due DiligencePhotoThe contacts at KPMG in connection with th

8、is presentation are:Bottom RowInsert NameTransaction ServicesDirector, New YorkKPMG LLPTel: Insert Phone NumberCell: Insert Phone Number Insert Email AddressInsert NameM&A TaxManager, New YorkKPMG LLPTel: Insert Phone NumberCell: Insert Phone NumberInsert Email AddressInsert NameNew YorkFinancia

9、l Due DiligencePhotoInsert NameNew YorkM&A TaxPhotoInsert NameNew YorkM&A TaxPhotoDRAFT 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights

10、reserved. Printed in the U.S.A. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity.3Tax Due Diligence and Structuring 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of indepen

11、dent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. Printed in the U.S.A. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity.4ContentsStructuring of TransactionslDifferent types

12、of tax entitieslDifferences between stock and asset dealslOverview of transaction structureslTax structures (including 338(h)(10) elections)lPurchase price allocation on asset deals.Basic Tax Modeling PointslDepreciationlAmortizationlTransaction costslAlternative Minimum Tax.Tax Matters with Deal Im

13、pactlNew net operating loss carryback provisionslSection 382 NOL limitationslInterest expense limitations. 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity.

14、All rights reserved. Printed in the U.S.A. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity.5Structuring of Transactions (1)Different Types of Tax Entities What are the most common types of “taxpayers” and are they taxable?Corp

15、orations tax paying entityS corporations flow-through entity Partnership flow-through entityLLC elect to be tax paying or flow-through entityTrusts may be tax paying or flow-through entityREITs combination Tax exempt entities pension funds, charities, etc. 2010 KPMG LLP, a Delaware limited liability

16、 partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. Printed in the U.S.A. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”),

17、a Swiss entity.6Structuring of Transactions (2)Different Types of Tax Entities Corporations CORPORATIONS OR “C CORPORATIONS”CONSOLIDATED TAX GROUPSlCorporations are taxed on net income from whatever sources derivedlTaxable income differs from GAAP incomelHighest federal corporate tax rate is current

18、ly 35%lDividend distributions from corporations are not deductible by the corporation and are included in taxable income of the recipients “Double Tax” results. lA consolidated tax return may be filed for 1 or more chains of US corporations connected through stock ownership with a parent corporation

19、lCommon Parent corporation must own at least 80% of the voting stock and 80% of the value either directly or indirectly through other includable corporationslPotential benefits of filing consolidated return include the ability to offset one members income against losses generated by another memberlD

20、ividend distributions from subsidiaries to parent are generally excluded from taxable income of the grouplBuying a subsidiary of a consolidated group may have some potential benefits but also some detriments. 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPM

21、G network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. Printed in the U.S.A. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity.7Structuring of Transactions (3)D

22、ifferent Types of Tax Entities S Corporations S CORPORATIONSWHO CAN ELECT S CORPORATION STATUS?lFor legal purposes, an S corporation is a corporation. The designation as an “S corporation” is a tax concept only.lS corporations are flow-through entities. As a result, taxable income and losses are pas

23、sed-through to the shareholders and included on the shareholders tax filings. The taxable income and losses reported to the shareholders must be broken out between capital and ordinary.lThe taxable income reported by the shareholder increases the shareholders tax basis in the stock of the S corporat

24、ion. It is this increased basis that is used to determine gain or loss upon disposition.lS corporation may be subject to tax if a built-in gain (“BIG”) existed at the time of the election to be treated as an S corporation and such BIG is recognized within 10 years from election. No BIG issue exits i

25、f S corporation status was elected upon formation and therefore S corporation had not been taxed previously as a C corporation. The BIG tax is intended to subject any appreciation in the assets at the time of the conversion from a C corporation to an S corporation to the corporate level tax.lDistrib

26、utions from S corporations are not taxed to the shareholder to the extent that such distributions do not exceed previous taxable income reported and original basis. lOnly eligible corporations can elect - must be a domestic corporation in a permitted business (i.e., not an insurance company or a spe

27、cific type of bank)lMust only have 100 or fewer eligible shareholders (75 shareholders pre-20XX). An eligible shareholder must be: lan individual who is a US citizenlan estate of a US citizenla specific type of trustlone of listed type of tax-exempt organization (i.e., an ESOP).lMust have only one c

28、lass of stock outstanding. However, differences in voting rights does not by itself signify different classes of stock.lElection is made by submitting a form, signed by all shareholders, to the IRS. 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network

29、of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. Printed in the U.S.A. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity.8Structuring of Transactions (4)Different T

30、ypes of Tax Entities Partnerships and Individuals PARTNERSHIPSLLCslTypes of partnerships include a General Partnership (GP), Limited Partnership (LP) or, where elected, LLC or LLP. The tax treatment of the various types are generally the same. The distinctions primarily relate to the partners liabil

31、ity under state law.lThe types of entities that may be partners in a partnership are not limited lA partnership must have at least two partners to be taxed as a partnershiplPartnerships are flow-through entities. Taxable income or losses generated by the partnership are passed-through and included o

32、n the partners tax filings. If a partner is also a partnership, the income and losses continue to be passed up the chain. lThe taxable income or losses included on a partners tax filing increase the partners tax basis in its partnership interest. Partnership debt is also allocated to the partners to

33、 increase the partners tax basis in the partnership interest.lDistributions received from a partnership are generally not taxable to the partners but reduce the partners tax basis in the partnership interest.lCan elect tax classificationlCorporationlPartnership (if at least 2 members)lDisregarded en

34、tity/division (single member LLC).lState tax treatment may differ.INDIVIDUALSlIndividuals are taxed on income from the sources derived (US or international)lThe highest individual tax rates are currently as follows:lOrdinary Income and ST Capital Gains 35%lLT Capital Gain - 15%lDividend Income 15%lI

35、temized deductions are permitted to offset gross incomelIndividual NOLs may be carried back 2 and forward 20 yearslIndividual Capital loss carryforwards may be carried forward indefinitely. In addition, $X,XXX may be used annually to offset ordinary income. 2010 KPMG LLP, a Delaware limited liabilit

36、y partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. Printed in the U.S.A. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”),

37、 a Swiss entity.9Structuring of Transactions (5)Overview of Transaction StructureslTaxable stock deallTaxable asset salelStock acquisition with a section 338(h)(10) electionlTax-free stock dealslJoint VentureslPartnership Interest. 2010 KPMG LLP, a Delaware limited liability partnership and the U.S.

38、 member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. Printed in the U.S.A. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity.10Structur

39、ing of Transactions (6)Differences Between Asset and Stock DealsSTOCK DEALSASSET DEALSlAcquire the shares of a Target, not individual assets and liabilities: lAcquired company remains in existencelAcquire tax attributes (e.g., NOLs, tax positions, etc.)lAcquire all liabilities, known and unknownlFro

40、m a tax perspective, sellers prefer to sell stock, because they will only incur one level of tax (a capital gain at the shareholder level) on a stock sale but may incur two levels of tax (corporate and shareholder) on a sale of assetslIn a taxable stock purchase, the seller generally recognizes gain

41、 or loss on the sale for the difference between the sales price and the sellers tax basis in the stock sold.lAcquire certain selected assets and assume certain selected liabilities:lDo not acquire tax attributeslAcquire select liabilities, as well as any liabilities directly associated with acquired

42、 assets (e.g., environmental contingencies associated with acquired assets).lFrom a tax perspective, buyers generally prefer to purchase assets to obtain a new (presumably stepped up) tax basis in the assets. The higher basis allows greater future deductions for depreciation and amortization.lIn a t

43、axable asset purchase, the seller generally recognizes a gain or loss on the taxable sale of its assets for the difference between its tax basis in the assets and the selling price. Shareholders of the selling company are further taxed when the after-tax proceeds are distributed to the shareholders.

44、lAsset deals are typically more complex and time consuming (i.e., assignability of contracts and identification of assets to acquire)lAsset deals typically do not require shareholder approval (BOD approval is sufficient in most cases). 2010 KPMG LLP, a Delaware limited liability partnership and the

45、U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. Printed in the U.S.A. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity.11Stru

46、cturing of Transactions (7)Stock Acquisitions with a Section 338 (h)(10) ElectionRequirements There must be a “qualified stock purchase” (“QSP”) of target. Acquirer must be a corporationAt least 80% of the vote and value of the stock of target must be acquired within a 12 month periodAcquisition mus

47、t be a taxable transaction (careful tax planning to avoid Sec. 351 tax free-treatment if there is any shareholder rollover of interest).The Section 338 (h)(10) election is available if the target is:A subsidiary member of an affiliated group of corporations (seller must be a domestic corporation)A s

48、ubsidiary member of a consolidated group of corporationsAn S corporation.The acquiring corporation and the target shareholders must jointly make a Section 338 (h)(10) electionThe election must be filed within 9 months of acquisition and must be signed by both parties. Allocation of purchase price mu

49、st be tentatively agreed to.TreatmentStock acquisition treated as a deemed asset acquisition for income tax purposes followed by a deemed liquidation of Target. The purchase price for the assets is the consideration paid plus the assumed liabilities (as defined for tax purposes).Legal and all other

50、treatment is a stock acquisitionPurchaser receives a fair market value tax basis in the assets deemed acquiredCorporate parent may be adverse if there is a significant inside/outside tax basis difference in the assets and stock to be sold. Seller may require additional compensation to cover adverse

51、tax consequences. State tax implications must also be considered.S Corporation Shareholder may also seek additional compensation to cover additional tax costs. Additional tax costs for an S corporation may include, built-in gains tax, tax rate differences on ordinary income (depreciation recapture,

52、cash to accrual adjustments) vs. capital gain income recognized and state taxes.A Section 338(h)(10) election should almost always be considered when acquiring an S corporation or a subsidiary of a consolidated group. 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm o

53、f the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. Printed in the U.S.A. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity.12Target (“Old” Target)S

54、eller ShareholderBuyer CorporationTarget (“New” Target)Deemed liquidation (treated as full payment in exchange for stock under Sec.331 if S-Corp or Sec 332)Deemed asset saleTarget StockCash, notes or other considerationLegal FormTax FormStructuring of Transactions (8)Stock Acquisitions with a Sectio

55、n 338 (h)(10) Election Flow of purchase considerationLegal structure post transactionBuyer CorporationTarget (“New” Target)Private Equity FundPrivate Equity Fund 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliate

56、d with KPMG International Cooperative, a Swiss entity. All rights reserved. Printed in the U.S.A. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity.13Targets tax basis balance sheet is as follows:Structuring of Transactions (9)S

57、tock Acquisition with and without a Section 338(h)(10) ElectionExample 1 Target Corporate SubsidiaryTarget is a wholly-owned subsidiary of Parent. Parent and Target file a consolidated return.Parents tax basis in the stock of Target is $XX,XXX. Target was acquired by Parent in a stock acquisition.Pu

58、rchase Price for stock of Target is $XX,XXXTax rate of 40%.Example 2 Target S Corporation Target has been an S Corporation since inception. Therefore no BIG.Shareholders tax basis in the stock of Target is $XX,XXXPurchase Price for stock of Target is $XX,XXXOrdinary Income tax rate of 35%Capital Gai

59、n tax rate of 15%State income taxes are not considered. AssetsLiabilitiesA/R2,000A/P1,000Inventory7,000Acc. Exp3,500PP&E22,000LT Liabilities 8,000Other1,00032,00012,500Net tax basis19,500 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of inde

60、pendent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. Printed in the U.S.A. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity.14ConclusionThe PV of the tax benefit of the election to the Acquirer is