14 Business Organizations with Tax Planning § 175.02

Summary

If a taxable transaction is chosen,1 the parties must also choose between a corporate sale of assets (“asset deal”) and a shareholder sale of stock (“stock deal”).2 There are several nontax factors which must be considered,3 but ultimately, tax factors are likely to be determinative. If a stock deal is chosen, it will probably be for one or more of the following reasons.4

• [1] Minimizing Taxable Gain or Maximizing Deductible Loss

  If the shareholders of a corporation have a high basis in their stock, so that little or no gain, or perhaps even a loss, would be realized from their sale of stock, a stock deal may be preferable to an asset deal. Such a situation is likely to occur, for example, when the shareholders have recently inherited their stock after a former shareholder’s death and thus acquired a stepped-up basis,5