A Tax Advantage of Business Combination Can Occur When the Existing

question 1

Multiple Choice

A tax advantage of business combination can occur when the existing owner of a company sells out and receives:​

• A)​cash to defer the taxable gain as a "tax-free reorganization."
• B)​stock to defer the taxable gain as a "tax-free reorganization."
• C)​cash to create a taxable gain.
• D)​stock to create a taxable gain.

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Definitions:

Present Value

The current worth of a future sum of money or stream of cash flows given a specified rate of return, considering the time value of money.

Speculative Bubbles

A situation in which prices for securities, especially stocks, rise far above their actual value based on expectations of further rises, typically followed by a sharp decline in prices.

Final Sale Price

The total cost at which a product or service is sold to the consumer, including the base price plus any additional charges or fees.

Future Value

The value of an investment or a sum of money at a specified future date, accounting for specified interest rates or earnings over time.