Which of the Following Statements Best Describes the Concept of Control

question 38

Multiple Choice

Which of the following statements best describes the concept of control as it applies to a §351 transaction?

• A)Control is defined as the ownership of 80 percent or more of a corporation's voting stock.
• B)Control is defined as the ownership of 80 percent or more of the fair market value of a corporation's stock.
• C)Control is defined as the ownership of 80 percent or more of a corporation's voting stock and 80 percent or more of the fair market value of a corporation's stock.
• D)Control is defined as the ownership of 80 percent or more of a corporation's voting stock and 80 percent or more of the total number of shares of each class of nonvoting stock.

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Definitions:

Gordon Model

A financial model that evaluates a stock's intrinsic value, based on future series of dividends that grow at a constant rate.

Growth Rate Assumption

An estimated rate at which a variable, such as a company's revenue or the economy's GDP, is expected to grow.

Hybrid Security

A hybrid security is a financial instrument combining elements of both debt and equity, offering benefits and risks of both types.

Common Stock

Represents ownership shares in a corporation, giving holders voting rights and a share in the company's profits via dividends.