Section 338(h)(10) of the Internal Revenue Code can provide significant tax benefits to a buyer of 80% or more of a target corporation. 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. The deemed asset sale for tax purposes increases the tax basis of the target’s assets which can significantly reduce the buyer’s future taxable income.
GT’s Quick Guide to Section 338(h)(10) Elections provides you with a quick reference to understanding the 338(h)(10) election, when and how it can be made and its impact on buyers and sellers.
Special thanks to Kathleen Hooban* for her assistance with this Alert.
*Not admitted to the practice of law.