Question

What tax strategies are available to your company and the company that you are acquiring?

Answer 1

Tax Strategies are used for reduce tax amounts and maintain taxations liabilities according to companies financial condition and growth.Tax strategies followed by a company are given below

1. Deduction in case of new business- When a new business is started, there are a large amount of in investment and expenses occured, which are related with startup a business and income is earned after a lapse of time. for coverup cost at smaller extent, taxation reductions are provided to a company. tax reductions upto $5000 is given on federal income tax including medicare and socail security also.

2.Deductions according to marital Status- When a married couple file a joint return deductions in tax amount as more than singular.$6350 are standard deductions in tax return paid by singulars. $12700 are duductions when a couple filed a joint return. Child deductions are $4050. Deductable amount is more in case of couple filed a joint return.

3. Medicare and Social Securities taxations- There is minimum alternative tax is imposed on employees on medicare and Social Security. This amount is deduced from wages paid to employees.

1.45% tax of wages for medical withholding

6.2% tax of wages for social security withholding

4. Tax Deductions in case of depreciation- depreciation is process of decrease in value of assets. assets lose their value year by year. depreciation is charged acoording to years. depreciation is treated as expense, so it is used for tax reductions. depreciation is charged for 10% to 50% per year . Automobiles losses more value so depreciation is charged 40% to 70%. Alowances are also given in case of depreciation. upto 50% in case of tangible assets and 100% in case of assets have highly depreciated.

5.Tax deductions in case of purchase vehicles - In case of purchase a car tax deduction is 1% of actual price of car. tax deductions in case of purchase vehicles is upto $500000.

6.Retirement Account and Pension Sechemes- The amount which is cut from salary and deposited into retirement account is tax free. So tax is not imposed on that amount which is send into retirement account for old age pension purposes.

7. Expenses for tax deductions- Some other expenses and expenditures used for reduce tax amount are

a) Office expenses

b) manufacturing expenses

c) trade expenses

d)transportation expenses

e) interest payable

f) repair equipments etc.

Tax Strategies for acquired company

1. Reduction in corporate tax- Corporate tax is 21% of revenues generated by a company. A Company is acquired through mergers and acquisition. In most of the cases the financial condition of the acquired company may not good. So, reductions on corporate tax is provided by government in case of aquiring a company. These reductions are 21% to 35% . minimun obligation to pay tax is 15.5%.

2. Capital gain tax- upto $38600, there is not capital gain tax implied on company. For $38601 to $425800 , 15% capital gain tax is imposed. For more than $425800 capital gains tax is 20%. Reductions for individuals are $12000, for married filed joint return $24000, $3000 for capital losses and $1500 in case married but filed separately.

3. Determine long term tax liabilities- it is necessary to determine long term tax liabilities of a company you are going to acquire. This is helpful for know about financial condition about company. Tax reductions and interest payable should listed for future securities and liabilities are necessary to deal with creditors, taxation department and crisis will come in future.

4. Risk considered before acquire- Risk related with company regarding creditors, capital loss, shut down conditions, surviving capabilies should be considered before aquiring, if risk should be analysed will come in future but it can be minimised through tax deductions and by raising profit policies, then list policies which will used for minimise risk. If risk is more and it is not under your control, then you may have to change your decisions regarding acquisition and others you should want to follow which are beneficial for growth.

5. Bank Loans and Deposits- Bank loans are liability to pay. if a company has long term loans, then vcheck for deposits, if deposits overcome loan liabilies, then bank credibility is in favour of you, because a company has more deposits than loan. If deposits are less. check for other sourses of income to overcome liablities. tax liablieties are imposed only when if deposits are considered as earning.

If you acquire a company under loss, but your own conpany has good financial condition, Decision may overcome loss one by other's good financial conditions. Tax deductions are more for manual transactions because liabilities of acquired company is treated as expenses.