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Video instructions and help with filling out and completing 338(g) election

Instructions and Help about 338(g) election

Hi I'm rich with tax TV with some information for businesses interested in making a 338 election in a merger and acquisition transaction one company purchasing another in a taxable transaction may elect to treat the purchase of stock as an asset acquisition in a typical stock purchase transaction the buyer does not receive a step-up in basis of the purchased assets but rather a carryover basis this is a problem because assets are depreciable and stock isn't the tax code provides a solution a company can make a 338 election to treat the stock purchase as a hypothetical asset purchase this way the buyers given a step up in the basis of the assets as a result the buyer now has a higher basis for depreciation of assets this is especially important for intangible assets such as goodwill the disadvantage of the election is recognition of gain or losses on the deemed sale as if the assets had been sold so this only makes sense when the present value of the future tax savings from depreciation and amortization exceed the current tax costs of the step up there are two types of Elections 338 G and 338 h10 the first doesn't change the tax treatment for the purchased company shareholders and is therefore a unilateral election made by the buyer the second will change the tax treatments for both parties and therefore is a joint choice for more information about the 338 h10 election or other M&A tax topics search tax TV com you.

FAQ

What is the difference between a 338 g and 338 h )( 10 election?
A Section 338(h)(10) election is much more common than a Section 338(g) election because the 338(g) election results in two levels of tax, whereas a 338(h)(10) election results in only one.
How does a Section 338 h )( 10 election differ from a section 338 g election?
A Section 338(h)(10) election is much more common than a Section 338(g) election because the 338(g) election results in two levels of tax, whereas a 338(h)(10) election results in only one.
What are the major consequences of a section 338 g election?
A purchaser making a Sec. 338(g) election obtains numerous benefits in the international context. 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?
In cases where the assets (including goodwill) of the target have appreciated, a section 338(h)(10) election will typically result in a step-up (increase) in the overall tax basis of the target's assets. A higher tax basis can provide a variety of tax benefits.
Who pays the tax on a 338 g election?
Section 338(h)(10) Election In the acquisition of a subsidiary, the selling group, rather than the buyer, pays tax on the gain from the deemed sale of the target's assets since the target owned by the selling group. As such, the 338(h)(10) election is made jointly by the buyer and seller.
When can you make a 338 election?
338 election. This election can be made when the acquiring corporation (the buyer) makes a qualifying purchase of 80% or more of the target company's stock. The target company can be either a C corporation or an S corporation, and the buyer can be either a C corporation or an S corporation.
What is a 338 g election?
In general, a 338(g) election allows an acquiring corporation to treat what would otherwise be a stock acquisition as an asset acquisition, solely for tax purposes. If the election is made, the target entity is deemed to sell its assets to a new target entity in a fully taxable asset sale.
Can an individual make a 338 election?
Only the deemed purchase/sale of the target company's assets is taken into account for tax purposes. A Sec. 338(h)(10) election can be made only when 1) the target company is an S corporation, or 2) the acquiring corporation buys stock of the target company from one or more corporate shareholders of the target company.
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