Identify Which of the Following Statements Is True

question 35

Multiple Choice

Identify which of the following statements is true.

• A) Acquisition of 100% of the stock of a target corporation in a taxable transaction followed by a tax- free liquidation of the target corporation permits a step- up in the basis of the target corporation's assets to their FMV.
• B) Usually when 100% of the stock of a target corporation is purchased by an acquiring corporation, the basis of the assets of the target corporation reflects the purchase price of the target stock.
• C) Acquisition of the stock of a target corporation in a taxable acquisition transaction is reflected in an increased basis for the target corporation's assets on its books.
• D) All of the above are false.

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Definitions:

Convertible

Refers to a security, usually a bond or a preferred stock, that can be converted into a specified number of shares of common stock.

Common Stock

A type of security that signifies ownership in a corporation, entitling the shareholder to a share of the corporation's profits and assets.

Consolidated Earnings Per Share

A calculation of the earnings per share of a parent company and its subsidiaries, providing a measure of the combined profitability on a per-share basis.

Convertible Securities

Convertible securities are financial instruments, like bonds or preferred stocks, that can be converted into a predetermined number of the issuer's equity shares.