If a Transaction Involves a Cash Purchase of Target Stock

question 77

True/False

If a transaction involves a cash purchase of target stock, the target company's tax cost or basis in the acquired stock or assets is increased or "stepped up" automatically to their fair market value (FMV), which is equal to the purchase price paid by the acquirer.

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Definitions:

Separation Of Duties

A risk management strategy that divides responsibilities within an organization to reduce the risk of fraud or error.

Internal Control System

Procedures and methods to control a firm’s assets as well as monitor its operations.

Accounting Department

A division within a company or organization that is responsible for managing financial records, transactions, and reporting.

Periodic System

An inventory system that updates inventory and cost of goods sold at the end of each accounting period.