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338(h)(10) election Form: What You Should Know
To determine when your stock sale is a controlled transaction, use: To determine when your stock sale is a controlled transaction, use a simple formula. The amount of the gain shown on the Form 8883 is the amount of the gain that would have been realized if (1) the stock purchase occurred after the close of the tax year. Example: If C acquired 100 shares of Target stock in 2023 and B acquired 100 shares of Target stock, then B's tax basis of 100 shares of Target stock at the time of purchase is equal to C's tax basis of 100 shares of Target stock after the tax year. Section 338(h)(10) Election, 2023 (TTC) The following table describes the basic steps required for a Section 338(h)(10) election to apply on a net operating loss carry forward, or a carry forward for that matter. Each of these steps are described in more detail at that location, as well as on the instructions for Form 8465, Computation of Net Loss. Form 8883 Instructions Step 1: Determine the adjusted basis of the acquisition (B's basis is 100 shares) Step 2: Enter the gain. This is the amount of stock the DSP would have paid if the acquisition had occurred on an earlier date. This step includes any adjustment for “fractions of shares” (such as a stock split), any gain included in the DSP's earnings and (if applicable) any carryover of any prior gain to the current year. Step 3: Enter the adjusted basis of C. This is the amount of stock the DSP would have paid if the acquisition had occurred at the close of the current year. Step 4: Add all amounts to 100. Do not leave any space before or after Step 3. If B and C owned the same number of shares of Target stock then, according to the above step, the purchase would be considered a controlled transaction because: C's gain would be determined before B's gain B's adjusted basis would be 100 shares, before C's gain of 100 shares If B and C each own a different number of shares of target stock then the following steps are required: A. If A owns 100 shares, then the acquisition would not be a controlled transaction because: B's adjusted basis would be 100 shares. The acquisition would be a controlled transaction because: B's adjusted basis would be 100 shares.
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