Step-Up in Tax Basis (M&A Glossary)

Summary

This is the increase in the value of the assets (including goodwill) that a buyer acquires in an asset acquisition. Such increase or "step up" in its "tax basis" is permitted for tax purposes because the buyer will generally receive the assets with an aggregate tax basis equal to the amount the buyer pays to the target plus (i) the liabilities inherited from the target and (ii) any transaction expenses. An increased basis generally reduces the tax payable by the buyer after the transaction through increased depreciation and amortization deductions on those assets.