The Shareholders in the Target Corporation Always Receive a Tax

question 26

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.

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Definitions:

Net Income

The total profit of a company after all expenses, including taxes and operating costs, have been subtracted from revenue.

Depreciation

A method of allocating the cost of a tangible asset over its useful life.

Indirect Method

A method of presenting the cash flow statement where net income is adjusted for non-cash transactions and changes in working capital to arrive at cash flow from operating activities.

Net Income

The net earnings of a company once all costs and taxes are subtracted from the total income.