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) A 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 a Tax standpoint.
B) A 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) A 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) A 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

Purchasing shares is often cheaper than buying assets because it involves acquiring control without directly purchasing each asset. However, it may be less advantageous tax-wise, as asset purchases can allow for a step-up in basis, leading to potential tax benefits.

A Inc Is Contemplating a Business Combination with B Inc