The Main Difference to Shareholders Between a Tax-Free and a Taxable

question 49

Multiple Choice

The main difference to shareholders between a tax-free and a taxable acquisition is that
I.in a tax-free acquisition the shares are only exchanged, while in a taxable transaction the shares are considered sold and realized capital gains or losses are taxed;
II.in a tax-free acquisition a capital gain or loss is realized and then new shares are issued; in a taxable transaction the assets are revalued, taxed on any capital gains or losses, and then shares are exchanged;
III.in a tax-free acquisition the shareholders simply take the cash and depart, while in a taxable transaction the shareholders must stay with the new entity

• A)I only
• B)II only
• C)III only
• D)I and III only

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Definitions:

Cost-benefit

A systematic approach to estimating the strengths and weaknesses of alternatives used to determine the best option through the evaluation of costs and benefits.

Past Oriented

A perspective or approach that places emphasis on traditions, history, and values from the past in decision making and lifestyle.

Retributivist

A philosophy of punishment where the focus is on the offender receiving a punishment proportional to the crime committed, based on the principle of just desert.

Utilitarian

A philosophical approach that emphasizes the greatest good for the greatest number of people as the primary consideration in decision making.