Colorado Technical University Mason Acquisition Worksheet

User Generated

fhtnechss

Business Finance

Colorado Technical University

Description

JIM is acquiring all of the assets of Mason Machining, Inc. in a merger transaction. Mason transfers assets having a FMV of $1,775,000 and an adjusted basis of $995,000 and $200,000 in liabilities to JIM in exchange for $750,000 in cash and $800,000 of JIM's common stock.

Click here to view Mason's Acquisition Data.

Explain what type of merger this is. JIM distributes its stock and cash to Mason in exchange for all of its assets. 

Calculate Mason's gain on this transaction. 

How much of this gain will Mason recognize? 

How must tax liability will Mason incur from this transfer? 

Mason distributes the JIM stock and cash to its shareholders for all of their shares of Mason’s stock. Shareholders' basis in this stock is $600,000. 

Calculate how much gain the Mason’s shareholders will realize and recognize on this transfer. 

How must tax liability will Mason’s shareholders incur from this transfer? 

  • Explain the tax implications for JIM. 

Explanation & Answer:
1500 Words
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Explanation & Answer

Attached.

Running Head: MASON ACQUISITION

1

Mason Acquisition
Student’s Name
Institutional Affiliation
Date
Instructor’s Name

MASON ACQUISITION

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Abstract

This paper is designed to present the transactions involved in the acquisition of Mason
Machining by Jefferson Industrial Machines. The paper introduces an understanding of the
outcomes from the acquisition and the responsibilities of each of the involved parties. It also
suggests the implications of the acquisition to the shareholders. Mason Machining was acquired
at an adjusted basis of 995,000, a fair market value of $1775,000 and $200,000 in liabilities. On
the other hand, JIM gave $800,000 of common stock and $750,000 in cash to Mason Machining.
The paper presents the method acquisition used by JIM to acquire Mason Machining. The
amount of gains from the merger are also discussed in the paper. Additionally, the tax
implications on both JIM and the shareholders are also addressed in detail. The tax liability for
Jefferson Industrial Machines is determined by the type of acquisition used to acquire Mason
Machining. The method of acquisition used is determined by analyzing three types of
acquisitions that would been utilized by Jefferson Industrial Machines to merge with Mason
Machining. This has allowed for the development of a comprehensive analysis of the
transactions involved in the merger and the determination tax liabilities on both parties.

MASON ACQUISITION

3
Introduction

Mason Machining was acquired by Jefferson Industrial Machines after a series of important
transactions. The assets were acquired at fair market value of $1,775,000with an adjusted basis
of $995,000. The liabilities totaled $200,000, with Jefferson Industrial Machines offering Mason
Machining $750,000 in cash and $800,000 common stock. The above information is critical in
determining the type of merger used in the acquisition.
Types of acquisition to be considered
In this scenario, Jefferson Industrial Machines could have considered three acquisit...


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Really useful study material!

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