Software for Everyone, Inc., $($SFE$)$ is a calendar year C$-$corp and has developed a

comprehensive set of software programs that compete directly with Microsoft. Rather than devote huge quantities of its resources to competing with SFE, Microsoft makes the decision to acquire SFE and its software for a purchase price of $$100$ million. You are hired to advise Microsoft on the details of this acquisition. Assume each question is independent of all other questions unless otherwise stated.

a$)$The first question Microsoft asks is how do we avoid making

ourselves liable for a possibly long list of unknown liabilities $($bank loans,

warranty claims, potential tax audits, etc.$)$ incurred by SFE over it$$s multi year

history? Does this goal influence how the acquisition should be structured?

How?

b$)$ If Microsoft is unable to follow your advice in question $($a$),$ is

there any alternative way to structure the acquisition that could achieve a

similar result?

c$)$ Microsoft would like the ability to make new tax elections,

relating to depreciation on the assets of SFE. Does this goal influence your

advice on how to structure the acquisition? How?

d$)$ Microsoft would like to be able to carryover a substantial

operating loss which SFE incurred during the years spent developing its

software. How should the acquisition be structured to allow maximum tax

carryovers to Microsoft from SFE?

e$)$ It is imperative that Microsoft be able to step up the basis in SFE

software which, because of its cutting edge nature, is worth vastly more than

the $$11$ million invested by SFE to develop the software. How should the

acquisition be structured to achieve this result?