Acquiring a firm with a tax loss can shelter the acquirer's earnings, unless the primary reason for the merger is:
A)diversification to reduce risk.
B)to benefit from economies of scale.
C)to lock in the acquired firm's source of critical supplies.
D)tax avoidance.

Question

Quizplus · Accepted Answer

Acquiring a firm with a tax loss can shelter the acquirer's earnings through tax avoidance. However, if the primary reason for the merger is diversification, benefiting from economies of scale, or locking in the acquired firm's source of critical supplies, the tax benefits may not be the main motivation for the merger.

Acquiring a Firm with a Tax Loss Can Shelter the Acquirer's