The tax status of the transaction may influence the purchase price by
A) Raising the price demanded by the seller to offset potential tax liabilities
B) Reducing the price demanded by the seller to offset potential tax liabilities
C) Causing the buyer to reduce the purchase price if the transaction is taxable to the target firm's shareholders
D) Forcing the seller to agree to defer a portion of the purchase price
E) Forcing the buyer to agree to defer a portion of the purchase price

Question

Quizplus · Accepted Answer

If the transaction is taxable, the seller may demand a higher price to compensate for potential tax liabilities. For example, if the transaction is structured as an asset sale, the seller may have to pay taxes on any gain realized from the sale of assets. This may lead to the seller demanding a higher price to offset the tax liabilities.

The Tax Status of the Transaction May Influence the Purchase