Answer:
True
Step-by-step explanation:
In the context of accounting, when a company takes over another company, the parent company must recognize the assets and liabilities of the subsidiary company at fair market value. The fair market value is the estimated price that an asset or liability would receive in a transaction between two willing and unrelated parties.
When the parent company adjusts the value of the subsidiary's assets and liabilities to fair market value, this creates a new basis in the subsidiary's assets and liabilities for both book (financial accounting) and tax purposes.
So, the statement "after a takeover, the parent's balance sheet shows a fair market value basis in the subsidiary for both book and tax purposes" is true.