A Inc. is contemplating a business combination with B Inc. However, A Inc.'s management is uncertain as to whether it should purchase B's assets or a majority of B's voting shares. The fair market values of B's assets far exceed their book values. A's management should be advised that IN MOST CASES:
A) the purchase of B's shares would likely be the cheaper method of acquiring control; however, it would be less advantageous to the consolidated entity from tax standpoint.
B) the purchase of B's shares would likely be the cheaper method of acquiring control. It would also be more advantageous to the consolidated entity from a tax standpoint.
C) the purchase of B's shares would likely be the costlier method of acquiring control; however, it would be more advantageous to the consolidated entity from a tax standpoint.
D) the purchase of B's shares would likely be the costlier method of acquiring control. It would also be less advantageous to the consolidated entity from a tax standpoint.

Question

Quizplus · Accepted Answer

The Answer of A Inc. is contemplating a business combination with B Inc. However, A Inc.'s management is uncertain as to whether it should purchase B's assets or a majority of B's voting shares. The fair market values of B's assets far exceed their book values. A's management should be advised that IN MOST CASES:
A) the purchase of B's shares would likely be the cheaper method of acquiring control; however, it would be less advantageous to the consolidated entity from tax standpoint.
B) the purchase of B's shares would likely be the cheaper method of acquiring control. It would also be more advantageous to the consolidated entity from a tax standpoint.
C) the purchase of B's shares would likely be the costlier method of acquiring control; however, it would be more advantageous to the consolidated entity from a tax standpoint.
D) the purchase of B's shares would likely be the costlier method of acquiring control. It would also be less advantageous to the consolidated entity from a tax standpoint.

A Inc Is Contemplating a Business Combination with B Inc