Merger Tax Effects A takeover bid can be structured in different ways, making it either a taxable or a nontaxable offer. Based on your understanding of the impact of takeover bids on the target and the acquiring firms, answer the following question and then check which statements are correct. The acquirer purchases the target firm's shares with either cash or nonvoting securities, such as debt securities, nonvoting preferred stock, or warrants. This transaction is taxable Statements Check all that apply. for the target firm's shareholders. The purchase will be recorded using the pooling of interests method rather than the purchase method. The acquiring firm adds the acquired assets to its books at their appraised fair market values. ✔Target shareholders tender their shares, receive their cash, and pay personal taxes on any realized capital gains. If the acquiring firm makes a partial cash down payment, the transaction is treated as an installment purchase, and the shareholders can spread their tax liability over the acquiring firm's payment period. ✔ The acquiring firm adds the acquired assets to its books at their book values.
Merger Tax Effects A takeover bid can be structured in different ways, making it either a taxable or a nontaxable offer. Based on your understanding of the impact of takeover bids on the target and the acquiring firms, answer the following question and then check which statements are correct. The acquirer purchases the target firm's shares with either cash or nonvoting securities, such as debt securities, nonvoting preferred stock, or warrants. This transaction is taxable Statements Check all that apply. for the target firm's shareholders. The purchase will be recorded using the pooling of interests method rather than the purchase method. The acquiring firm adds the acquired assets to its books at their appraised fair market values. ✔Target shareholders tender their shares, receive their cash, and pay personal taxes on any realized capital gains. If the acquiring firm makes a partial cash down payment, the transaction is treated as an installment purchase, and the shareholders can spread their tax liability over the acquiring firm's payment period. ✔ The acquiring firm adds the acquired assets to its books at their book values.
Chapter23: Corporate Restructuring
Section: Chapter Questions
Problem 9QTD
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Transcribed Image Text:Merger Tax Effects
A takeover bid can be structured in different ways, making it either a taxable or a nontaxable offer. Based on your understanding of the impact of
takeover bids on the target and the acquiring firms, answer the following question and then check which statements are correct.
The acquirer purchases the target firm's shares with either cash or nonvoting securities, such as debt securities, nonvoting preferred stock, or
warrants.
This transaction is_taxable
Statements Check all that apply.
for the target firm's shareholders.
The purchase will be recorded using the pooling of interests method rather than the purchase method.
The acquiring firm adds the acquired assets to its books at their appraised fair market values.
Target shareholders tender their shares, receive their cash, and pay personal taxes on any realized capital gains.
If the acquiring firm makes a partial cash down payment, the transaction is treated as an installment purchase, and the shareholders can
spread their tax liability over the acquiring firm's payment period.
The acquiring firm adds the acquired assets to its books at their book values.
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