Taxable transactions usually involve the purchase of the target's voting stock, because the purchase of assets automatically will trigger a taxable gain for the target if the fair market value of the acquired assets exceeds the target firm's tax basis in the assets.

Question

Quizplus · Accepted Answer

In a taxable transaction, purchasing the target's assets can indeed trigger a taxable gain if the fair market value of those assets exceeds the target's tax basis in them, because the transaction is treated as a sale of each asset, leading to capital gains tax on the difference.

Taxable Transactions Usually Involve the Purchase of the Target's Voting