In a Tax-Free Acquisition, the Shareholders of the Target Firm

question 28

Multiple Choice

In a tax-free acquisition, the shareholders of the target firm:

• A) receive income that is considered to be tax-exempt.
• B) gift their shares to a tax-exempt organization and therefore have no taxable gain.
• C) are viewed as having exchanged shares on a dollar-for-dollar basis.
• D) sell their shares to a qualifying entity thereby avoiding both income and capital gains taxes.
• E) sell their shares at cost thereby avoiding the capital gains tax.

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Definitions:

Constitutional Provisions

Constitutional provisions are specific articles, clauses, and amendments in a constitution that outline the framework and principles governing a country.

Grandfather Clause

Loophole created by southern disenfranchising legislatures of the 1890s for illiterate white males whose grandfathers had been eligible to vote before the Civil War.

Albion W. Tourgée

A 19th-century American lawyer, judge, and author known for his efforts in civil rights, especially in advocating for African American rights during the Reconstruction era.

Fourteenth Amendment

An amendment to the US Constitution, granting citizenship to all persons born or naturalized in the United States, including former slaves, and guaranteeing all citizens equal protection of the laws.