Now let's take a look at the sale of someone's shareholding in a company. In this case, we've got a situation where the company has assets worth 100, property, plant, and equipment, which is completely financed by equity and the balance sheet balances. However, the purchase price of the shares was 200, more than the book value, and that's normal. People often buy companies for a great deal more than the book equity on the balance sheet. Now, let's assume that the shareholding is then sold again for 300, so the whole shareholding is sold for 300. This means that the vendor, the person selling the shares, is going to be taxed on the stock basis because the item that's changing hands here is not the assets, it's the shares. So they will be taxed on the difference between the sale price of 300 and their original purchase price of the shares of 200, a capital gain of 100. Now, from the tax perspective, the only thing that's changed hands are the shares. The assets are still earned by the corporate entity, so the title is still the corporation. The acquirer who's purchased the shares has paid 300. And this becomes the new outside basis, or stock basis, for tax purposes. And the corporate will become a subsidiary if the acquirer is already a corporation. So even then, the assets are not going to change hands. The assets will still be titled by the original corporate owner. A slight exception to this tax treatment is in the United States where you make a 338 election. and there are a number of different types of those elections, but this will change that effect. There are a number of rules you have to abide by to get a 338 election, though. Lastly, the assets in the corporation, confusingly, are going to be revalued. So although the purchase property, plant, and equipment was 100 in the company, because the acquisition has happened, the accounting, but not the tax authorities, will revalue the assets to a new fair value amount and at the same time that they will create a deferred tax liability reflecting the potential tax that they'll have to pay if the assets are then sold because there'll be a gain against the asset value. Let's take a look at this from a pre and post-sale basis. So pre-sale, we had the outside basis, the stock basis, of 200. The inside basis, or the value of the asset, is 100. Post-sale, the new outside basis, or the stock basis, it's going to be 300, and for tax purposes only, the inside basis will be 100. However, because the accounting rules require us to revalue a company's assets and liabilities in an acquisition, even if only the shares are purchased, those assets would have to be revalued to 300 and the difference between the 100 and the 300 multiplied by the tax rate will also be required to be presented as a deferred tax liability. Post-sale, the new stock basis is 300, the asset basis stays at 100, but for the accounting purposes, the consolidated accounts we will see the assets revalued.