The Shareholders in the Target Corporation Always Receive a Tax

question 91

True/False

The shareholders in the target corporation always receive a tax basis in the stock received from the acquirer equal to the stock's fair market value.
The stock generally takes a substituted basis equal to the tax basis in the shareholder's stock in the target corporation.

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Definitions:

Risky Assets

Investments with a high degree of uncertainty in their returns, usually implying a greater potential reward.

Investment Opportunity Set

The array of all possible investment combinations available to an investor considering both risk and return.

Global Minimum-Variance Portfolio

The Global Minimum-Variance Portfolio is an investment portfolio constructed to achieve the lowest possible level of risk (variance) for its expected return, using assets from around the world.

Perfectly Negatively Correlated

A relationship between two securities in which one's price moves in the opposite direction of the other's, resulting in a correlation coefficient of -1.