Which of the following statements regarding spin-offs and carve-outs is not true?
A)Spin-offs are not taxed if the shareholders of the parent company are given a majority of shares in the new company.
B)Spin-offs are not taxed if the shareholders of the parent company are given at least 80 percent of the shares in the new company.
C)Gains or losses from carve-outs are taxed at the corporate tax rate.
D)In carve-outs, the parent company retains majority control.

Question

Quizplus · Accepted Answer

BDSpin-offs are generally not taxed if the shareholders of the parent company are given at least 80% of the voting power in the new company, making statement A incorrect because it inaccurately states a majority rather than the specific 80% requirement. Statement D is incorrect because in carve-outs, the parent company may not necessarily retain majority control; it depends on the specifics of the transaction. Carve-outs involve selling a portion of a subsidiary to the public, and the parent company can sell any percentage, including less than a majority.

Which of the Following Statements Regarding Spin-Offs and Carve-Outs Is