Which of the Following Statements Best Describes the Tax Consequences

question 30

Multiple Choice

Which of the following statements best describes the tax consequences of a section 338 election?

• A) Gain or loss is recognized by the acquired corporation on the deemed sale of its assets and the buyer gets a stepped-up basis in the assets acquired.
• B) Gain or loss is recognized by the acquired corporation on the deemed sale of its assets and the buyer gets a carryover basis in the assets acquired.
• C) Gain or loss is not recognized by the acquired corporation on the deemed sale of its assets and the buyer gets a stepped-up basis in the assets acquired.
• D)Gain or loss is not recognized by the acquired corporation on the deemed sale of its assets and the buyer gets a carryover basis in the assets acquireD.The tax benefits from a step-up in basis usually is negated by the immediate tax paid on the deemed sale of assets by the acquired corporation.

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Definitions:

Quantity Change

An alteration in the amount of goods or services supplied or demanded in a market.

Average Fixed

The fixed costs of production divided by the quantity of output produced, illustrating how those costs are spread over output.

Average Fixed Cost

The fixed costs of production divided by the quantity of output produced.

Total Output

The total quantity of goods or services produced by an individual, firm, industry, or economy.