Which One of the Following Statements Concerning Taxes and Acquisitions

question 68

Multiple Choice

Which one of the following statements concerning taxes and acquisitions is correct?

• A) In a tax-free acquisition, the shareholders in the acquiring firm maintain their status quo while the shareholders in the target firm are treated as if they sold their shares.
• B) In a taxable acquisition, any gains or losses of the target shareholders will be taxed as ordinary income.
• C) If the shareholders of the target firm receive shares of the acquiring firm in an acquisition, the acquisition is generally considered a taxable acquisition.
• D) In a taxable acquisition, the shareholders in both the target firm and the acquiring firm are treated as if they sold their shares and any capital gains are subject to taxation.
• E) In a taxable acquisition, the shareholders in the target firm are treated as though they sold their shares and any capital gains or losses will be realized.

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Definitions:

Taxable Income

The sum of money earned by a person or a business that is used to calculate the owed tax payable to the government.

After-Tax Income

The amount of income that remains after all taxes have been deducted.

Sales Tax

A tax levied by a government on the sale of goods and services, typically calculated as a percentage of the selling price.

Excise Taxes

Taxes imposed on specific goods, services, or activities, often used to discourage consumption of certain items or to raise revenue for targeted purposes.