How does a 338 h )( 10 election work?
The buyer and the seller jointly make a 338(h)(10) election. With this election, the buyer purchases the stock, which allows the target company to maintain non-transferrable assets (e.g. contracts) and remain a separate entity from a legal standpoint.
Can an S Corp make a 338 election?
The U.S. Tax Code allows buyers and sellers of the stock of an S corporation to make a section 338(h)(10) election so that a qualified stock purchase will be treated as a deemed asset purchase2 for federal income tax purposes.
What is a section 338 h election?
GT’s Quick Guide to Section 338(h)(10) Elections A 338(h)(10) election allows a buyer of stock of an S corporation or a corporation within a consolidated group to treat the transaction as an acquisition of 100% of the assets of the target for tax purposes.
How long do you have to make a 338 election?
If the target is an S corporation, a section 338(h)(10) election must be made by all of the shareholders of the target, including shareholders who do not sell target stock in the QSP. File Form 8023 by the 15th day of the 9th month after the acquisition date to make a section 338 election for the target corporation.
How does a 338 election work?
An Internal Revenue Code (IRC) Section 338 election is often advantageous for buyers in corporate acquisitions. Sec. 338 permits a corporation that makes a “qualified stock purchase” of another corporation to elect to treat such acquisition as an asset rather than a share acquisition for federal tax purposes.
Can an LLC make a section 338 election?
However, an LLC taxed as a partnership is not eligible to make a 338(h)(10) election. Solution. Many states’ statutes now allow a corporation to merge into an LLC, and vice versa. The parties could agree to merge the target S corporation into a new LLC to be formed by the investment group.
When can I make a 338 election?
338 election. This election can be made when the acquiring corporation (the buyer) makes a qualifying purchase of 80% or more of the target company’s stock. The target company can be either a C corporation or an S corporation, and the buyer can be either a C corporation or an S corporation.
Does the buyer or seller make a 338 election?
The buyer and seller (all stockholders) must jointly make the election – it cannot be unilaterally made by one side. For legal purposes, a 338(h)(10) election remains a stock sale despite being deemed an asset sale for tax purposes.
What is a section 338?
Who can make a 338 election?
How does a 338 g election work?
For a domestic corporate buyer of the stock of a foreign corporation, an election under section 338(g) has been a longstanding tax planning tool that permits the buyer to treat the transaction as an asset purchase for U.S. federal income tax purposes.
Who can make 338 election?