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

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).

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

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) election

Learning Objectives

After completing this course, you will be able to:

• Identify corporations eligible to make a Section 338(h)(10) election
• Determine foreign corporations that may benefit from an election under Section 338(g)
• Decide the tax consequences of making an election under 338(h)(10)
• Ascertain critical differences between 338(h)(10) and 336(e) eligibility requirements

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite:

  Three years+ business or public firm experience preparing complex tax forms and schedules, supervising other preparers or accountants. Specific knowledge and understanding of corporate taxation, including taxation of businesses, accounting methods, net operating losses and loss limitations; familiarity with net operating loss carry-backs and carry-forwards.

  
  

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IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).