Which of the following statements best describes the application of the continuity of enterprise principle to a Type A tax-deferred reorganization?
A)The continuity of business enterprise principle must be satisfied for both the acquirer and the target corporation.
B)The continuity of business enterprise principle must be satisfied for only the target corporation.
C)The continuity of business enterprise principle must be satisfied for only the acquirer.
D)The continuity of business enterprise principle does not have to be satisfied as long as the business purpose principle is satisfied.

Question

Quizplus · Accepted Answer

The continuity of business enterprise principle requires that the target corporation's business or a significant portion of its business assets continue to be operated by the acquiring corporation after the reorganization. This principle ensures that the reorganization is not merely a means to distribute assets but continues the target's business enterprise.

Which of the Following Statements Best Describes the Application of the Continuity