For a Spin-Off to Be Tax-Free to the Shareholder It

question 43

Multiple Choice

For a spin-off to be tax-free to the shareholder it must satisfy which of the following:

• A) The parent firm must have a controlling interest in the subsidiary before it is spun off.
• B) After the spin-off, both the parent and the subsidiary must remain in the same line of business in which each was involved for at least 5 years before the spin-off.
• C) The spin-off cannot have been used as a means of avoiding dividend taxation by converting ordinary income into capital gains.
• D) The parent's shareholders must maintain significant ownership in both the parent and the subsidiary following the transactions.
• E) All of the above

---

Definitions:

Methyl Pentanoate

An ester formed from methanol and pentanoic acid, used in flavorings and fragrances.

β-Ketoester

An ester compound containing a ketone group (C=O) at the beta-position relative to the ester group.

Claisen Condensation

A chemical reaction where two esters or an ester and a carbonyl compound react in the presence of a base to form a β-keto ester or a β-diketone.

Ester Enolate

A reactive intermediate formed from the deprotonation of an ester, used in various organic synthesis reactions.