Section 338 H 10 Election Impact To Seller

A section 338 h 10 election refers to an election under section 338 h 10 of the federal tax code. The s corporation equity but. If the target is an s corporation all of the target s shareholders including shareholders who do not sell target stock in the qsp must make the election.

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Gt S Quick Guide To Section 338 H 10 Elections Insights Greenberg Traurig Llp

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Buying Selling A Business Tax Considerations

This election applies to acquisitions of corporate subsidiaries or s corporations the election is made jointly by the acquirer and sellers before the deal is consummated and the seller bears any incremental tax cost from the deemed asset sale.

Section 338 h 10 election impact to seller. Section 338 h 10 internal revenue code section. As a result of a section 338 h 10 election a stock sale for legal purposes will be treated as an asset sale for tax purposes for both the buyer and seller. 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.

338 h 10 the section 338 election provides a particu lar federal income tax advan tage in transactions involving the sale of s corporation equi ty when compared to the sale of the c corporation equity. The section 338 election allows the buyer that acquires. Legal business and financing strategies.

As a result the 338 h 10 election is often a compromise on behalf of a seller in order to close the deal. Not admitted to the practice of law. If various conditions are met the election allows the parties in a sale of stock of a corporation to treat the transaction for federal income tax purposes as if it had been structured as an asset sale.

In a regular section 338 election two levels of tax are imposed. A section 338 h 10 election is jointly made by the purchasing corporation and the common parent of the selling consolidated group or the selling affiliate or s corporation shareholder s. Quick guide to section 338 h 10 and section 336 e elections 8 15 2016 roger royse upcoming webinar upcoming event june 9 12 00 pm 1 30 pm pacific time.

A section 338 h 10 election is a joint election that requires agreement between and among all of the selling shareholders and the prospective corporate buyer. Having said that as part of the negotiation sellers will frequently demand a higher purchase price in response to a 338 h 10 election as additional compensation to offset the additional tax burden they will incur. A section 338 h 10 election allows an electing buyer p and seller t to treat p as having purchased t s assets for tax purposes even though p purchased t s stock for legal purposes.

Special thanks to kathleen hooban for her assistance with this alert. One on the shareholders upon their sale of the target stock and the other on the deemed. Roger royse will make a presentation on startups in a down economy.