If an acquisition is made using cash payment then the acquisition is
Answers
Explanation:
Paying for an Acquisition With Cash
The form of payment generally preferred by the shareholders of the acquiree is cash. ... However, a cash payment also means that the selling shareholders must pay income taxes on any gains immediately. From the perspective of the acquirer, a cash payment presents both pluses and minuses
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If an acquisition is made using cash payment then the acquisition is:
A. taxable
B. viewed as exchanging of shares and is not taxed
C. a tax-free transaction as no capital gains or losses are recognized
D. none of the above
Answer:
The correct option is (A) Taxable that is If an acquisition is made using cash payment then the acquisition is Taxable.
Explanation:
- It is especially valued by stockholders who are unable to sell their shares in privately owned businesses through traditional channels.
- Additionally, they are no longer concerned about how their company's future performance would affect how much they will be paid.
- The extent to which sellers are typically ready to take a smaller cash payment over a greater payment in stock or debt is a good indicator of how much cash is favoured.
- A cash settlement, however, also entails immediate payment of income taxes on gains by the selling stockholders.
- One benefit is that, in a competitive bidding scenario, the seller is more likely to accept the bid of the bidder ready to pay cash.
- Additionally, by paying in cash rather than stock, the acquiree's shareholders are excluded from any future profits from the purchase and instead receive all of the acquirer's current shareholders' upside performance.
Hence, we can say that If an acquisition is made using cash payment then the acquisition is taxable.
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