When can I make a 338 election?
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.
What are the major consequences of a section 338 g election?
For federal income tax purposes, a Sec. 338(g) election made on a foreign target results in a step-up in the target’s assets’ bases, eliminates historic earnings and profits (E&P), and ends the target’s tax year.
What are the major consequences of a section 338 h )( 10 election?
A Section 338(h)(10) election allows an electing buyer (P) and seller (T) to treat P as having purchased T’s assets for tax purposes, even though P purchased T’s stock for legal purposes. Because P purchased T’s stock for legal purposes, T will remain in existence.
Who can make a section 338 g election?
“New target” has a fresh start for most federal income tax purposes, including a fair market value basis in its assets. A §338(g) Election is made unilaterally by the purchasing corporation, generally results in double tax, and is rare except in acquisitions of foreign targets.
What is a 338 h election?
A section 338(h)(10) election refers to an election under section 338(h)(10) of the federal tax code. If various conditions are met, the election allows the parties in a sale of stock of a corporation to treat the transaction for federal income tax purposes as if it had been structured as an asset sale.
How does section 338 election work?
338 election converts the target company into a C corporation immediately before the deemed taxable sale of the target company’s assets. In those situations, the seller would be taxed at only the shareholders’ personal level if the stock is sold for a taxable gain. Finally, making a regular Sec.
What is the difference between a 338 g and 338 h )( 10 election?
338 (g) election, which is most useful in the case of foreign acquisitions, and the Sec. 338(h)(10) election, which is commonly used in the case of domestic acquisitions. 338(g) election, the target recognizes gain on the deemed sale of its assets. The tax impact of this gain is borne by the acquirer.
How does a 338 g election work?
When a purchaser makes a section 338(g) election, the foreign target entity (the “old target”) is treated as if it sold its assets at the close of the acquisition date. The old target is then deemed the “new target,” which purchases the old target’s assets as of the beginning of the day after the acquisition.
What is an h10 election?
What is a 338(h)(10) election? In simple terms, a 338(h)(10) is a tax election for a qualified stock purchase (QSP), which recharacterizes a stock purchase as an asset purchase for federal tax purposes. It remains a stock purchase for all other legal purposes, such as contracts and licensing (more on that later).
