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    Sale of Shares Versus Assets

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    tara.tzaferis
    The document compares selling shares versus selling company assets from a shareholder's perspective. If the shareholder sells shares, they receive funds after paying capital gains tax. If the company sells assets, the money goes to the company and is subject to corporate taxes before any remaining funds are distributed to the shareholder as a liquidating dividend, also subject to tax. The document provides templates to calculate the net cash for the shareholder under each scenario to determine the better option.

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    Sale of Shares Versus Assets

    Uploaded by

    tara.tzaferis
    20 views6 pages
    The document compares selling shares versus selling company assets from a shareholder's perspective. If the shareholder sells shares, they receive funds after paying capital gains tax. If the company sells assets, the money goes to the company and is subject to corporate taxes before any remaining funds are distributed to the shareholder as a liquidating dividend, also subject to tax. The document provides templates to calculate the net cash for the shareholder under each scenario to determine the better option.

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    Sale of Shares versus assets

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    The document compares selling shares versus selling company assets from a shareholder's perspective. If the shareholder sells shares, they receive funds after paying capital gains tax. If the company sells assets, the money goes to the company and is subject to corporate taxes before any remaining funds are distributed to the shareholder as a liquidating dividend, also subject to tax. The document provides templates to calculate the net cash for the shareholder under each scenario to determine the better option.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    20 views6 pages

    Sale of Shares Versus Assets

    Uploaded by

    tara.tzaferis
    The document compares selling shares versus selling company assets from a shareholder's perspective. If the shareholder sells shares, they receive funds after paying capital gains tax. If the company sells assets, the money goes to the company and is subject to corporate taxes before any remaining funds are distributed to the shareholder as a liquidating dividend, also subject to tax. The document provides templates to calculate the net cash for the shareholder under each scenario to determine the better option.

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    © All Rights Reserved
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    You are on page 1of 6

    Sale of Shares versus Sale of

    assets
    Analysis

    The idea is to determine if it is better for an individual (Shareholder) to sell his shares or have the company sell
    its assets.

    If the shareholder sells his shares, he will receive the funds directly (after paying taxes on the TCG).

    If the company sells the assets, the money belongs to the company after it pays taxes.

    In order to compare both, the company would need to be wound up after it sells its assets and pays its liabilities
    (including taxes on the disposition of its assets).

    When the wind up occurs the shareholder will receive the remaining funds in the company (after the company
    sells its assets and pays its liabilities, including taxes on the disposition of its assets).

    These funds will be taxed as a liquidating dividend to the shareholder. After the shareholder pays tax on the
    liquidating dividend the remaining funds belong to him.

    Which ever of these two alternatives provides him with more funds is the one you will recommend he does.
    (Does he sell the shares or the company sells the assets and winds up).
    Template - Sell of Shares for shareholder

    Proceeds from sale of shares (1) $ x


    ACB ( x)
    Capital gain $ x

    TCG 50% $ x
    C.G. exemption $( x)
    Taxable Income $ 0

    Tax (TI * Tax Rate Given) (2) $ x

    Proceeds from above (1) $ x

    Tax from above (2) $( x)

    Net cash to shareholder (1) – (2) $ XX


    Template – Sale of assets by corporation

    Step 1 Set up the following schedule and complete;


    Calculate the tax implications of the sale of assets and payment of liabilities

    Proceeds ABI TCG CDA Non Eligible


    RDTOH

    Opening balance xx xx

    Inventory xx xx - - -
    Building xx xx xx xx -
    Land xx xx xx -
    Marketable Securities xx - xx xx -
    Cash xx - - - -
    ------------- ----------- ------------- --------- -----------
    xx xx xx xx xx
    Liabilities (xx)
    Tax (1) (xx)
    RDTOH (2) xx
    -------------

    Funds available to xx
    Distribute (A)

    [1]
    Tax: on ABI xx * % = xx
    on TCG xx * % = xx
    ($xx)

    [2]
    RDTOH: opening balance xx + TCG xx * 30 2/3% = $xx
    Step 2: Calculate Liquidating dividend (Deemed Dividend and TCG)

    Funds available from schedule (A) $ xx


    PUC of shares ( xx)
    Deemed dividend (B) $ xx
    CDA ( xx)
    Deemed taxable dividend $ xx

    Funds available (A) $ xx


    Deemed dividend (B) ( xx)
    Adjusted proceeds $ xx
    ACB Shares ( xx)

    Capital gain $ xx
    TCG $ xx
    Step 3: Calculate the Personal Tax

    TCG (Previous step) $ xx


    Taxable Dividend (Previous step) $ xx

    Tax on TCG (Tax Rate Given) $ xx


    Tax on Taxable Dividend (Tax Rate Given) $ xx
    Personal Tax payable $ xx

    Funds Available from schedule (A) $ xx


    Personal Tax Payable above ( xx)
    Net cash to shareholder $ xx

    Decision: Compare net cash from sale of shares (Step 1) to net


    cash from sale of assets (Step 3). Recommend the one that
    provides the most net cash.

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