Law Commons^™

What Is A Merger?: The Case For Taxing Cash Mergers Like Stock Sales., Jeffrey L. Kwall

Faculty Publications & Other Works

In a merger, neither the assets nor the stock of one corporation are physically transferred to another corporation. Rather, the two corporations are unified by operation of law. The absence of a physical transfer of assets or stock obscures the tax effects of a merger. To determine these effects, a merger must be analogized to a sale of assets or a sale of stock. These alternative analogies yield significantly different results when the consideration for the merger is cash. When a cash merger is analogized to an asset sale, a 35% corporate tax is normally imposed. By contrast, no corporate …