Section 338(h)(10) Election
Section 338(h)(10) Election section 338(h)(10) election is a tax provision that allows qualifying transactions to be treated as asset sales for federal tax purposes, even when structured as stock sales.
This election enables buyers and sellers to strategically optimize tax treatment in corporate acquisitions.
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How Section 338(10) Election Works
The 338(h)(10) election is a powerful tax strategy in M&A transactions that allows companies to transform a stock sale into an asset sale for tax purposes without changing the legal structure of the transaction.
When both buyer and seller jointly elect this treatment, the transaction is treated as if the target company sold all its assets to an unrelated party and then liquidated, creating significant tax optimization opportunities.
The key benefit is that the buyer receives a stepped-up basis in the acquired company's assets, enabling valuable depreciation and amortization deductions while the seller maintains capital gains treatment.
Key Points
- •Requires joint election by buyer and seller
- •Must involve at least 80% stock acquisition
- •Creates a deemed asset sale for tax purposes
- •Allows basis step-up for buyer
- •Typically benefits both parties through tax optimization
Frequently Asked Questions
Related M&A Concepts
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