CFA Practice Question

There are 86 practice questions for this study session.

CFA Practice Question

In a stock purchase,

I. The acquirer's shareholders must pay tax on gains with the merger transaction, but there are no taxes at the corporate level.
II. Normally 50%+ of the shareholders of the target company need to approve the transaction.
III. The acquirer generally avoids the assumption of liabilities.
A. I and II
B. II and III
C. II only
Explanation: I is false. The target company's shareholders must pay tax on gains.

III is false. The acquirer also assumes the target's liabilities.

User Contributed Comments 2

User Comment
krisscfa I. The Target's (not acquirer's) shareholders must pay tax on gains with the merger transaction, but there are no taxes at the corporate level.

III. The acquirer generally assumes all liabilities.
LoCo83 III. Acquirer avoids the assumption of liabilities in an ASSET purchase... a stock purchase assumes the associated leverage/liabilities.
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