In a Tax-Free Acquisition, the Shareholders of the Target Firm

Multiple Choice

In a tax-free acquisition, the shareholders of the target firm:

A) receive income that is considered to be tax-exempt.
B) gift their shares to a tax-exempt organization and therefore have no taxable gain.
C) are viewed as having exchanged shares on a dollar-for-dollar basis.
D) sell their shares to a qualifying entity thereby avoiding both income and capital gains taxes.
E) sell their shares at cost thereby avoiding the capital gains tax.