Question

Which of the represent disadvantages of a cash purchase of target stock?  

1. Buyer responsible for known and unknown liabilities.
2. Buyer may avoid need to obtain consents to assignments on contracts.
3. NOLs and tax credits pass to the buyer.
4. No state sales transfer, or use taxes have to be pai
5. Enables circumvention of target’s board in the event a hostile takeover is initiated.

Answer 1

NOL and tax credit are passed on to the buyers in case of a Cash purchase of a target stock. It can often be known that since there is no state sale transfer and taxes has to be paid, then tax credit are also not passed to the company but it will be passed to the buyers.

all the other statements are representing the advantage of acquiring the target stock.

Correct answer will be option( C )NOL and tax credit pass onto the buyer