Mergers and acquisitions require an understanding of complicated tax and accounting rules.
Mergers and acquisitions can be taxable or tax-free transactions. In a taxable transaction,
each selling shareholder must pay taxes on the stock’s capital appreciation. Should the
acquiring firm elect to write up the assets, additional tax implications arise. However,
acquiring firms do not generally elect to write up the assets for tax purposes. The selling
stockholders do not pay taxes at the time of a tax-free acquisition.
Accounting for mergers and acquisitions involves a choice of the