Big CoWould Like to Purchase a Patent Owned by Small Co

question 47

Essay

Big Co.would like to purchase a patent owned by Small Co.that Big believes could be used to make a profitable product.Small has other assets and owes a variety of debts.Discuss the advantages to Big if it only purchases the patent,rather than Small Co.in its entirety.

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Definitions:

Marginal Tax Rate

The rate at which the next dollar of taxable income is taxed, reflecting the incremental increase in tax paid on an additional dollar of income.

Average Tax Rate

The ratio of the total amount of taxes paid to the total taxable income, representing the percentage of income paid in taxes.

Proportional Tax

A tax system where the rate of taxation is the same for all taxpayers, regardless of income or wealth.

Payroll Tax

Duties levied on both employers and employees, usually reflecting a portion of the payroll expenses.