Exam 16: Tax Issues in Mergers & Acquisitions

In the United States, amortization of goodwill is deductible for tax purposes over a period of:

Research seeking to find the existence of asset basis step-up as a motivating factor for mergers and acquisitions before the Tax Reform Act of 1986, such as research by Auerbach and Reishus, confirmed that asset basis step-up was a significant motivating factor.

In the United States and under the purchase method, the acquiring company is entitled to income of the acquired company only from the date of purchase.

Research by Scholes and Wolfson on M&As before 1981, between 1981 and 1986, and after 1986 found:

In the United States, goodwill is amortized over a period not exceeding:

One advantage of a Type C reorganization is that the bidder does not need to be concerned about the target soliciting its shareholder's approval of the transaction.

In the United States, amortization of goodwill for acquisitions prior to August 10, 1993, was not deductible for tax purposes.

Research by Auerbach and Reishus found that:

In a Type B reorganization in the United States, at least what percent of the payment to the target must be stock in the acquiring company:

In a Type A reorganization in the United States, the following consideration may be used to acquire a target:

In the United States, up until 2001, there was only one accepted accounting treatment for mergers and acquisitions-pooling.

Research by Hong, Mandelker, and Kaplan found that stock prices were significantly affected by the choice of acquisition accounting treatments.

Research by Auerbach and Poterba and by Altshuler and Auerbach on tax loss carry forwards indicate that the following tax-related factor may offset the otherwise full value of the target's losses:

In a Type C reorganization, cash may be used only if 50% of the target shares were purchased with stock.

In a Type B reorganization in the United States, cash may constitute no more than 20% of the consideration paid for the target's shares.

There are different types of Type D reorganizations and one type covers acquisitions while another type covers breakups such as spinoffs.

In a Type A reorganization in the United States, at least what percent of the payment to the target must be stock in the acquiring company:

In the United States, a transaction may be partially taxable if the consideration is a combination of stock and cash.

In a Type B Reorganization, the stock purchases must be completed over no longer than:

Research by Hayn on the role that the tax attributes of transactions played in determining abnormal returns for targets and acquirers found: