Parent Firms with a High Tax Basis in a Business

question 71

True/False

Parent firms with a high tax basis in a business may choose to spin-off the unit as a tax-free distribution to shareholders rather than sell the business and incur a substantial tax liability.

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Definitions:

Standard Cost

A detailed estimate of what a product should cost.

Actual Cost

The actual amount spent on goods, services, or other expenses, as opposed to budgeted or standard costs, including all direct and indirect costs.

Principle of Exceptions

A management principle focusing on identifying and addressing areas that significantly deviate from the norm or expected results, often utilizing reporting and analysis.

Variances

Differences between planned amounts and actual amounts incurred in operations, budgets, or financial projections.