Which of the Following Statements Regarding Mergers and Taxes Is

question 32

Multiple Choice

Which of the following statements regarding mergers and taxes is false?

• A) Carryback and carryforward provisions essentially deliver the benefits of conglomeration to a small firm with volatile earnings.
• B) It might appear that a conglomerate has a tax advantage over a single-product firm simply because losses in one division can offset profits in another division.
• C) Companies with current-year losses can also use them to offset earnings (carryback) for the twenty prior years.
• D) The IRS will disallow a tax break if it can show that the principal reason for a takeover is tax avoidance, so it is unlikely that the tax advantage could, by itself, be a valid reason to acquire another firm.

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Definitions:

Diagnose Situations

The process of identifying the nature or cause of a scenario or problem by examining the symptoms or indicators.

Best Leadership Style

A theoretical concept suggesting there is an optimal way of leading people that maximizes their performance and satisfaction, which may vary depending on context and individual differences.

Significant Challenge

A substantial obstacle or difficulty that requires considerable effort or innovation to overcome.

Vroom-Jago Contingency Variables

Factors that influence the effectiveness of decision-making processes, based on the Vroom-Yetton-Jago decision-making model of leadership.