________________, it is impossible for a tax-free acquisition to take place.
A) If an acquisition is for business purposes.
B) If the purchasing ﬁrm exchanges its own stock for the selling ﬁrm's equity.
C) If an acquisition is being undertaken with cash.
D) If the stockholders in the target ﬁrm will retain an equity interest in the bidder.
E) If the selling shareholders will be considered to have exchanged their old shares for new ones of equal value.

Question

Quizplus · Accepted Answer

A tax-free acquisition can only take place if the purchasing firm exchanges its own stock for the selling firm's equity, the stockholders in the target firm retain an equity interest in the bidder, or the selling shareholders will be considered to have exchanged their old shares for new ones of equal value. If an acquisition is being undertaken with cash, it will not qualify for tax-free treatment.

________________, It Is Impossible for a Tax-Free Acquisition to Take