Some Tax Problems in Connection with Acquisitions
by RICHARD B. KEIGLEY Partner, New York Office
Presented before the Association for Corporate Growth and Diversification, Inc., New York—September 1961
WHEN starting to talk about tax planning in connection with ac-quisitions we are in an area of almost unlimited possibilities. I am therefore going to try to brush over some parts of this area, and in so doing hope to hit on a few things that may present a fresh viewpoint
to some of you.
When starting to think of what should be regarded as tax problems in an acquisition, we must first consider what the parties concerned really want. What does the seller want? What does the buyer want? What problems are particularly important because the acquisition is in the offing and how are they to be solved? Our method of solving them is largely dependent on the objectives of the parties to the transaction.
There are so many possibilities that we just cannot even think of drawing conclusions without taking note of all the facts. So obtaining the facts, finding out what the situation really is, is the first thing we should start doing. Of course we can't give all the pertinent facts in a discussion of this nature but we can introduce a few of them as we go along.
Now, let us look at some rather basic considerations. The theory of having provisions for nontaxable or partially taxable transactions in the Internal Revenue Code is for the primary purpose of enabling businesses, without adverse tax consequences, to enter into realistic business reorganizations that have legitimate business purposes and are not primarily or solely for tax purposes. In such situations recognition
of gain or loss is postponed until such time as the acquiring company has really sustained an economic loss. There are several basic kinds of tax deferments or special tax-treatment provisions with which we may work. We have reorganization exchanges with which all of us are familiar. Just in case some of them may have receded too far into the background for ready recollection, perhaps I should mention the kinds of things with which we should all be basically familiar.