In a Tax-Free Acquisition,the Shareholders of the Target Firm

question 23

Multiple Choice

In a tax-free acquisition,the shareholders of the target firm:

• A)receive income which is considered to be tax-exempt.
• B)gift their shares to a tax-exempt organization and therefore have no taxable gain.
• C)are viewed as having exchanged shares on a dollar-for-dollar basis.
• D)sell their shares to a qualifying entity thereby avoiding both income and capital gains taxes.
• E)sell their shares at cost thereby avoiding the capital gains tax.

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Definitions:

High Ethical Standards

Principles that guide individuals and organizations to conduct activities in a morally right, honest, and responsible manner.

Organisations

Groups or entities (such as corporations, nonprofits, institutions) structured to achieve specific goals through collective effort.

Accommodative Strategy

Accepts social responsibility and tries to satisfy prevailing economic, legal and ethical performance criteria.

Discretionary Responsibilities

Obligations that an individual or organization chooses to undertake out of ethical or moral principles rather than because of legal requirements.