Which of the following is a case in which tax gains are used as a justification for purchasing another firm?
A) The target firm has resources to which the purchaser wants access.
B) The target firm has no unused debt capacity.
C) The target firm has access to markets that the bidder wishes to exploit.
D) The target firm has unused net operating losses that can be used by the bidder.
E) The target firm has resources that are complementary to the bidder.

Question

Quizplus · Accepted Answer

The correct answer is D because unused net operating losses of the target firm can be valuable to the acquiring firm. These losses can be applied to offset future taxable income, thereby reducing the acquiring firm's tax liability. This tax benefit can serve as a significant incentive for the acquisition.

Which of the Following Is a Case in Which Tax