The main difference in a tax-free versus taxable acquisition to the shareholders is that:
I. In a tax-free acquisition 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 and loss are realized and then new shares issued, while in a taxable transaction the assets are revalued, taxed on any capital gains and losses and then shares 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

Question

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In a tax-free acquisition, shareholders exchange their shares without realizing capital gains or losses, whereas in a taxable acquisition, the shares are considered sold, and any capital gains or losses are taxed.

The Main Difference in a Tax-Free Versus Taxable Acquisition to the Shareholders