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TAX ISSUES

IN

MERGERS AND ACQUISTIONS

Thomas I. Lyon, Becky Wray

DIXON ODOM, PLLC

August 15, 2002


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INTRODUCTION

Tax Considerations in the following

Areas:1. Taxable acquisitions

2. Tax deferred reorganizations3. Corporate separations, spin-offs, split-offs and

split-ups


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Case Study

The business which is the target of the acquisition is EnRob, Inc., a C corporation

which was organized about ten years ago to manufacture computer parts for

various Fortune 500 corporations. Fred EnRob, President and Chairman of thecorporation, owns 81% of the outstanding stock and other family members own the

remaining shares.

The company owns several patents related to the computer parts which it

manufactures. EnRob has a substantial portion of the market for its computer parts

and enjoys a superior reputation in the industry. The company has two locations,

one in the Research Triangle Park and a second in High Point, North Carolina.

Each location is operated as a division and both have been operational more than

five years.

Warren Buffet and his company Bufet, Inc., a C corporation, are considering the

potential acquisition of EnRob.


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TAXABLE TRANSACTIONS:ASSET PURCHASE ANDSTOCK PURCHASE


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ASSET PURCHASE

E

E Shareholders

B

B Shareholders

ASSETS

CONSIDERATION


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STOCK PURCHASE

E Shareholders

E B

Sto

ck

Cons

ideration


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TAX DEFERREDREORGANIZATIONS:MERGERS,STOCK FOR STOCK ACQUISITIONS,STOCK FOR ASSET ACQUSITIONS,FORWARD TRIANGULAR MERGERS AND

REVERSE TRIANGULAR MERGERS


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TAX DEFERRED REORGANIZATIONS

E

E Shareholders

B

B Shareholders

MERGER

STOCK


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E Shareholders

B

B Shareholders

POST-MERGER


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STOCK FOR STOCK

ACQUISTION

E Shareholders

E B

Sto

ck

Sto

ck


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POST

ACQUISTION

E

B


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STOCK FOR ASSETACQUISITION

E

E Shareholders

B

B Shareholders

Assets

Stoc

k


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POSTACQUISITION E

E Shareholders

B

B Shareholders

Liquidates


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FORWARD

TRIANGULARMERGER

E Shareholders

B

B Sub

Merger

E

$$

$$


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POST

MERGER

B

B Sub


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REVERSETRIANGULAR

MERGER

B

E Shareholders

Merger

B Sub

E

$$

$$


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POST

MERGER

B

E


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CORPORATE SEPARATIONS:

SPIN-OFFS,

SPLIT-OFFSAND SPLIT-UPS


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SPIN-OFFS, SPLIT-OFFS AND SPLIT-UPS

Assets

ESub

E

E Shareholders E Sub

SPIN-OFF


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Post Spin-Off

E

E Shareholders

E Sub

E Shareholders


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A

ssets

SS

tock

Some/all EShareholders

PSto

ck

E

E Sub

Split-Offs


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Post Split-Off

E

Some/all

E Shareholders

E Sub

Some/all

E Shareholders

CORPORATE SEPARATIONS


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Split-Up

ES1

ES2

E Shareholders

E

Assets

Assets

St

oc

k

CORPORATE SEPARATIONS


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Post Split-Up

ES1

E Shareholders

ES2

E Shareholders

E Liquidates


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This information is published by Maupin Taylor, P.A.for its clients and friends. Its reports are based on

statutes, court decisions and administrative rulings or

announcements. Some information may be dated -

please check publication dates. These items shouldnot be applied to actual legal problems without prior

review by your attorney.

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