Which Two of These Are Required for an Acquisition to Be

question 25

Multiple Choice

Which two of these are required for an acquisition to be considered tax-free?
I.The bidder must purchase the target firm for less than its current market value.
II.The acquisition must have a business purpose other than the avoidance of taxes.
III.The stockholders in the target firm must retain an equity interest in the bidder.
IV.The acquisition must be a lump sum cash transaction.

• A)I and II only
• B)III and IV only
• C)II and III only
• D)I and III only
• E)II and IV only

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Definitions:

Public Choice Theory

An economic theory that explores how public decisions are made, emphasizing the self-interest of voters, politicians, and bureaucrats.

Special Interest Groups

Organizations that advocate for specific causes or interests, influencing public policy and opinion.

Infant-Industry

An industry in its early stages within a particular country, often argued to need protection from international competition until it becomes competitive.

Tariffs

Taxes imposed by a government on imported goods, affecting their price and availability within the domestic market.