Which of the Following Is an Advantage of a Spin-Off

question 21

Multiple Choice

Which of the following is an advantage of a spin-off versus selling a subsidiary and distributing the cash?

• A)Increases the transaction costs associated with selling the subsidiary.
• B)Shareholders must immediately pay capital gains taxes versus ordinary income taxes on the value of the spin-off.
• C)A spin-off guarantees a lower cost of capital.
• D)The spin-off is not taxed as a cash distribution.

---

Definitions:

Strict Scrutiny

The most exacting standard of review used by the courts in determining the constitutionality of a statute; requires a compelling government interest and the least restrictive means of attaining that objective.

Insurance Coverage

The amount of risk or liability covered for an individual or entity by way of insurance services.

Constitution Authority

The legal power or right granted to an entity or person by a constitution, governing the ability to perform certain actions.

Federal Funds

Central bank reserves loaned by one bank to another, typically overnight, to meet reserve requirements.