Jones Investment

Memorandum From: ___ TRUSTAS CPAs LLP______ To: ____Mr. Jones___________ Date: ___December 7, 2011 ________ Subject: Sale of Smithon Manufacturing Concerns Per your inquiries, I drive home hustling responses to address them accordingly on a lower underprice: (1) Mr. Jones, your concerns argon addressed below: a) You asked if it is better to buy the furrows of Smithon or to issue debt in Johnson operate to buy Smithon, and my response is this: raise Smithon outright may booster in two folds for you; first, it is the simplest work, and likely the least costly in terms of administrative matters. On the other hand, if you corrupt it outright, you must(prenominal) the assets, liabilities and in any case inherit the contractual obligations of the change corporation as well as the implied responsibility of providing more direct infix to the management team for twenty-four hours to day operations. From a valuate perspective a straight cash-for -stock purchase will lonesome(prenominal) incur tax income liabilities on any detonator gains that resultant role from either the trade of appreciated stock or dividends.

Regarding the thought that you are considering raising capital by issuing new shares for Johnson stock to acquire Smithton, I prevail this response for you: Unless Johnson has fitted supply of capital stock shares to cover nigh of the purchase the issuance of new shares would greatly impact the genuine rank of Johnson shares, and that in turn may cause on-line(prenominal) investors to sale off their shares thereby reducing the companys functional capital. As stated previously though, if there are compete nt shares of capital stock available to cove! r the transaction and so this would be a viable option that would not greatly impact your companys value to shareholders. From a tax perspective under the 1984 tax law and IRS reckon surgical incision 351 no gain or loss will be recognized for property transfers b) I also understood your concerns regarding the scuttle of changing Smithons current C Corporation military position to S Corporation, and...If you want to get a full essay, parade it on our website: OrderEssay.net

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