What are the tax implications of a merger or acquisition?

Tax implications of a merger or acquisition in New Mexico depend on the type of transaction that is taking place. In general, there are three types of transactions: stock purchases, asset purchases, and taxable mergers. In a stock purchase, the acquiring company pays the seller the market value of their stock and the seller is taxed on the gain of the sale, which is the difference between the sale price of the stock and its original cost basis. In an asset purchase, the buyer purchases the business’s assets from the seller and the seller is assessed a tax on any gain resulting from the transaction. This gain is the difference between the asset’s original cost basis and the sale price. The buyer’s basis in the assets is the sale price of the asset, which may be less than the asset’s original cost basis. Finally, in a taxable merger, the stock of the acquired company is exchanged for the stock of the acquiring company. The seller must pay tax on the difference between the sale price of their stock and the original cost basis, just as they would in a stock purchase. In most of the cases, in order to avoid tax implications, the acquiring company must structure the transaction in a way that allows it to transfer the assets of the acquired company and take advantage of the Internal Revenue Code’s tax provisions. Doing so typically requires the help of a tax attorney.

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What are the tax implications of a merger or acquisition?

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