Acquiring Corporation Acquires All of the Stock of Target Corporation

question 75

Multiple Choice

Acquiring Corporation acquires all of the stock of Target Corporation in a Type B (stock-for-stock) reorganization. Both corporations have always filed separate tax returns. Which one of the following statements regarding the acquisition is correct?

• A)Acquiring and Target Corporations can elect to file a consolidated tax return.
• B)Acquiring and Target Corporations must file a consolidated tax return.
• C)Acquiring Corporation assumes all of the tax attributes of Target Corporation.
• D)Acquiring Corporation must step up or step down the basis of the Target Corporation's assets to their FMV on the acquisition date.

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Definitions:

New Equilibrium

The state reached when market forces realign, resulting in a new balance between supply and demand after a disturbance.

Total Surplus

The aggregate net benefit to society derived from the production and consumption of a good or service, comprising both consumer and producer surplus.

Equilibrium Price

The market price at which the quantity of goods supplied is equal to the quantity of goods demanded, achieving a state of market balance.

Consumer Surplus

The division between the total financial commitment consumers are willing to make for a product or service and the amount they actually contribute.