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Section 338(h)(10), 338(g), and 336(e) Elections: Tax Benefits of Treating Stock Purchases as Asset Purchases

Tax Consequences to Buyers and Sellers, Eligible Parties, and Filing Forms 8023 and 8883

Note: CLE credit is not offered on this program

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Thursday, February 10, 2022

Recorded event now available

This course will compare and contrast the elections to treat stock purchases as asset purchases for federal income tax purposes under Sections 336(e), 338(h)(10), and 338(g). Our panel of merger and acquisition experts will explain the tax considerations of making each election, eligibility, and the related reporting requirements.

Description

Generally, an asset purchase, as opposed to a stock purchase, is preferred by buyers. Buying assets allows the purchaser to step up the basis in assets acquired to fair market value, often allowing accelerated depreciation deductions on these assets. On the other hand, Sellers prefer a stock sale taxed at capital gains rates and often require a higher purchase price to offset the unfavorable tax consequences of an asset sale.

A Section 338(h)(10) election allows buyers to treat certain stock purchases as asset purchases for federal income tax purposes. Legally, the purchase remains a stock purchase. Many qualifications must be met by the buyer and seller making the election. For example, the election is only available to sellers who are a U.S. corporate subsidiary or an S corporation. Both the buyer and seller (and all shareholders) must make the election. Ineligible buyers, like partnerships or individuals, may want to consider a Section 336(e) election.

Foreign businesses may want to consider the corollary Section 338(g) election. A domestic corporation acquiring the stock of a foreign corporation may benefit from treating the purchase as an asset purchase. Unlike the Section 338(h)(10) election, only the purchaser makes this election and it results in tax at the corporate and shareholder levels. The tax consequences and mechanics of making these elections are complex.

Listen as our panel of acquisition and disposition experts details the benefits and caveats of making elections under Sections 336(e), 338(h)(10), and 338(g).

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Outline

  1. Stock vs. asset purchases and sales
  2. Section 338(h)(10) election
  3. Section 336(e) election
  4. Section 338(g) election
  5. Filing Form 8023, Elections Under Section 338 for Corporations Making Qualified Stock Purchases
  6. Filing Form 8883, Asset Allocation Statement Under Section 338

Benefits

The panel will cover these and other critical issues:

  • Eligibility requirements for corporations making an election under section 338(h)(10)
  • Foreign tax consequences of making an election under Section 338(g)
  • Properly completing Form 8023, Elections Under Section 338 for Corporations Making Qualified Stock Purchases
  • The effect of Section 338 elections on tax attributes
  • The benefits and availability of a section 336(e) electioin

Faculty

Brauer, Eric
Eric Brauer
Tax Manager
RSM US

Mr. Brauer has over seven years of experience in corporate tax law, including three years at the Office of Chief...  |  Read More

Phillips, Patrick
Patrick Phillips
Principal
RSM US

Mr. Phillips is a Senior Manager in RSM’s Washington National Tax practice, focusing on Mergers and Acquisitions...  |  Read More