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1. Executive Summary Borrowing is not the only instrument that shields corporate income against taxes. Apart from interest payments, any other expense, but especially depreciation and amortization play a major role in determining the corporate tax liability. Asset step-up induced depreciation and amortization tax shields are created in the framework of corporate mergers and acquisitions. (1) Asset step-ups allow the acquirer to increase (step-up) the pre-acquisition tax basis of acquired assets to the fair market value or the purchase price. The stepped up tax basis is fully depreciable/amortizable and thus provides additional tax shields and hence value, for the combined entity after the transaction.