Acquire, Inc. (client), an S Corp, is seeking to acquire Target, LLC (taxed as a C Corporation). Target has 3
shareholders with two of them holding 20% each and one holding 60% of its total shares (1,000 shares total between all 3 shareholders). Only one of Target’s shareholders is a non US citizen.
The market value of each Target share is worth $1,000/per share. Each share has a cost basis of $25 per share. The fair market value of Target’s assets are $800,000 with a cost basis of $200,000. One of the assets include commercial real estate with a fair market value of $200,000 with a liability (mortgage) of $220,000 that can be assumed by Acquire, Inc.
Acquire, Inc’s shares are valued at $500/per share with a cost basis of $50 per share. The total shares outstanding is 1,000 all solely own by sole shareholder (Mr. Client-Shareholder). Acquire’s total corporate assets are valued at $400,000 with a cost basis of $200,000.
Client (Acquire, Inc.) wants to know whether it’s possible to acquire Target, Inc. without any taxable consequences to the company or to Mr. Sole Shareholder-Client?
The options to acquire the company may be done through either purchasing the assets or the shares.
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