For a Spin-Off to Be Tax-Free to the Shareholder It

question 92

Multiple Choice

For a spin-off to be tax-free to the shareholder it must satisfy which of the following:

• A) The parent firm must have a controlling interest in the subsidiary before it is spun off.
• B) After the spin-off, both the parent and the subsidiary must remain in the same line of business in which each was involved for at least 5 years before the spin-off.
• C) The spin-off cannot have been used as a means of avoiding dividend taxation by converting ordinary income into capital gains.
• D) The parent's shareholders must maintain significant ownership in both the parent and the subsidiary following the transactions.
• E) All of the above

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Definitions:

Embargo Act

A law passed by the United States Congress in 1807 that prohibited American ships from trading in all foreign ports, aiming to avoid conflicts.

U.S.-Canada Border

The international boundary between the United States and Canada, recognized as the longest undefended border in the world, spanning various terrains and facilitating cross-border movement.

Smuggling

The illegal trade or transportation of goods, people, or contraband across borders, bypassing legal procedures or avoiding taxes and regulations.