A Transaction Generally Will Be Considered Non-Taxable to the Seller

question 69

True/False

A transaction generally will be considered non-taxable to the seller or target firm's shareholder if it involves the purchase of the target's stock or assets for substantially all cash,notes,or some other nonequity consideration.

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Definitions:

Option Contract

An agreement that gives the owner the right, but not the obligation, to buy or sell a specific asset at a specific price for a set period of time.

Put Options

Financial contracts giving the owner the right, but not the obligation, to sell a specified amount of an underlying asset at a predetermined price within a specified time frame.

Exercise Price

The price set for buying or selling an asset under the terms of an options contract.