What tax and nontax advantages and disadvantages accrue when anacquiring corporation purchases all of a target​ corporation'sstock for cash and subsequently liquidates the target​corporation?
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Select the advantages of purchasing all of the target​corporation's stock for cash and subsequently liquidating thetarget corporation into the acquiring corporation.​ (Select allthat​ apply.)
A. The acquiring corporation assumes the tax attributes of thetarget corporation.
B. The target corporation pays a​ tax, however the​shareholders' receive the distribution as a​ tax-freedistribution.
C. The only tax cost incurred to accomplish the transaction isthat the target​ corporation's shareholders must recognize​gain/loss on the sale of their target corporation stock.
D. No tax cost is incurred in the transfer of the assets fromthe target corporation to the acquiring corporation.
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Select the disadvantages of purchasing all of the target​corporation's stock for cash and subsequently liquidating thetarget corporation into the acquiring corporation.​ (Select allthat​ apply.)
A. A Sec. 338 election can be used to​ step-up the​ assets'inside​ bases, however this generally involves tax on the gain fromthe deemed Sec. 338 sale.
B. The acquiring corporation does not obtain a​ stepped-up basisin the acquired assets.
C. Tax is incurred in the transfer of the assets from the targetcorporation to the acquiring corporation.
D. The stock basis​ \"loss\" cannot be deducted for five​ years,and therefore does not provide a current benefit to the acquiringcorporation.
