Which of the following statements regarding mergers and taxes is FALSE?
A) Carryback and carryforward provisions essentially deliver the benefits of conglomeration to a small firm with volatile earnings.
B) It might appear that a conglomerate has a tax advantage over a single-product firm simply because losses in one division can offset profits in another division.
C) Companies with current-year losses can also use them to offset earnings (carryback) for the twenty prior years.
D) The IRS will disallow a tax break if it can show that the principal reason for a takeover is tax avoidance, so it is unlikely that the tax advantage could, by itself, be a valid reason to acquire another firm.
Answer: C
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