Question

Identify which of the following statements is true. A. Acquisition of the stock of a target corporation in a taxable acquisition transaction is reflected in an increased basis for the target​ corporation's assets on its books. B. Usually when​ 100% of the stock of a target corporation is purchased by an acquiring​ corporation, the basis of the assets of the target corporation reflects the purchase price of the target stock. C. Acquisition of​ 100% of the stock of a target corporation in a taxable transaction followed by a taxminus−free liquidation of the target corporation permits a stepminus−up in the basis of the target​ corporation's assets to their FMV. D. All of the above are false.

Answer 1

D. All of the above are false.

Step-by-step explanation:

Taxable Acquisition (not tax-free acquisition) is a merger where the value of the assets a stockholder receives at the end of the transaction is substantially different from the value of assets before the transaction began. For tax purposes, stockholders are treated as having sold their shares, and are therefore subject to capital gains taxes.

A taxable acquisition of the assets of a target corporation that is subsequently liquidated, results in a loss of the target corporation's tax attributes and shareholders recognizing gain or loss on the surrender of their target stock. An acquiring corporation in a tax-free or a taxable acquisition transaction does not recognize gain or loss when its stock is issued in exchange for property.

Answer 2

The answer to this question is option D

Step-by-step explanation:

All of the of the above statements are false