The main difference to shareholders between a tax-free and a taxable acquisition is that
I.in a tax-free acquisition the shares are only exchanged, while in a taxable transaction the shares are considered sold and realized capital gains or losses are taxed;
II.in a tax-free acquisition a capital gain or loss is realized and then new shares are issued; in a taxable transaction the assets are revalued, taxed on any capital gains or losses, and then shares are exchanged;
III.in a tax-free acquisition the shareholders simply take the cash and depart, while in a taxable transaction the shareholders must stay with the new entity
A)I only
B)II only
C)III only
D)I and III only

Question

Quizplus · Accepted Answer

The main difference lies in how the transactions are treated for tax purposes. In a tax-free acquisition, shares are exchanged without triggering immediate tax consequences, whereas in a taxable transaction, the exchange is treated as a sale, potentially resulting in capital gains or losses that are subject to taxation.

The Main Difference to Shareholders Between a Tax-Free and a Taxable