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

question 23

Multiple Choice

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

• A)receive income which 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:

Sale

A contract in which ownership of goods is transferred by the seller to the buyer for a price.

Title

Legal ownership of property, especially real estate or automobiles.

Oral Contracts

Agreements that are made verbally and are legally binding, though harder to prove than written contracts.

Written Confirmation

A document that records and verifies specific details of an agreement or transaction between two or more parties.