August 15, 2002

TAX ISSUES
IN
MERGERS AND ACQUISTIONS

Thomas I. Lyon, Becky Wray

DIXON ODOM, PLLC

 INTRODUCTION

Tax Considerations in the following

Areas:
1. Taxable acquisitions
2. Tax deferred reorganizations
3. Corporate separations, spin-offs, split-offs and
split-ups
 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 the
corporation, 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.
TAXABLE TRANSACTIONS:
ASSET PURCHASE AND
STOCK PURCHASE
 ASSET PURCHASE

ASSETS
E B
CONSIDERATION

E Shareholders B Shareholders
STOCK PURCHASE

E B

ck
n
atio
o er
St Co
n sid

E Shareholders
 TAX DEFERRED
REORGANIZATIONS:
MERGERS,
STOCK FOR STOCK ACQUISITIONS,
STOCK FOR ASSET ACQUSITIONS,
FORWARD TRIANGULAR MERGERS AND
REVERSE TRIANGULAR MERGERS
TAX DEFERRED REORGANIZATIONS

MERGER
E B
C K
O
ST

E Shareholders B Shareholders
TAX DEFERRED REORGANIZATIONS

B
POST-MERGER

E Shareholders B Shareholders
 TAX DEFERRED REORGANIZATIONS

E B

STOCK FOR STOCK c k

to c k
ACQUISTION S o
St

E Shareholders
TAX DEFERRED REORGANIZATIONS

B
POST
ACQUISTION

E
 TAX DEFERRED REORGANIZATIONS

Assets
E B
c k
STOCK FOR ASSET to
ACQUISITION S

E Shareholders B Shareholders
 TAX DEFERRED REORGANIZATIONS

POST
ACQUISITION E
B Liquidates

E Shareholders B Shareholders
TAX DEFERRED REORGANIZATIONS

E B
FORWARD M $$
TRIANGULAR er
ge
MERGER r
$$

E Shareholders B Sub
TAX DEFERRED REORGANIZATIONS

B
POST
MERGER

B Sub
TAX DEFERRED REORGANIZATIONS

E B
REVERSE

$$
M
er
TRIANGULAR ge
r
MERGER

E Shareholders $$ B Sub
TAX DEFERRED REORGANIZATIONS

B
POST
MERGER

E
CORPORATE SEPARATIONS:
SPIN-OFFS,
SPLIT-OFFS
AND SPLIT-UPS
 CORPORATE SEPARATIONS:
SPIN-OFFS, SPLIT-OFFS AND SPLIT-UPS

SPIN-OFF
E

Assets
b
Su
E

E Shareholders E Sub
 CORPORATE SEPARATIONS:
SPIN-OFFS, SPLIT-OFFS AND SPLIT-UPS

E E Sub

E Shareholders E Shareholders

Post Spin-Off
 CORPORATE SEPARATIONS:
SPIN-OFFS, SPLIT-OFFS AND SPLIT-UPS

Assets
k
oc
St
ock
S St
P

Some/all E
Shareholders
E Sub
Split-Offs
 CORPORATE SEPARATIONS:
SPIN-OFFS, SPLIT-OFFS AND SPLIT-UPS

E E Sub

Some/all Some/all
E Shareholders E Shareholders

Post Split-Off
 CORPORATE SEPARATIONS:
SPIN-OFFS, SPLIT-OFFS AND SPLIT-UPS

E
Split-Up

As
ts
se

se
Stock
As

ts
ES1 ES2

E Shareholders
 CORPORATE SEPARATIONS:
SPIN-OFFS, SPLIT-OFFS AND SPLIT-UPS

ES1 ES2
E Liquidates

E Shareholders E Shareholders

Post Split-Up
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 should
not be applied to actual legal problems without prior
review by your attorney.