Section 338(h)(10) is a section of the Internal Revenue Code (IRC) that allows for an election by a corporation or its shareholders when a corporation is acquired in a stock purchase. This type of election allows the acquiring corporation to treat the transaction as an asset sale for tax purposes.
This is advantageous to the acquiring corporation because it allows them to get a step up in the basis of the assets to the fair market value at the point of the acquisition. The acquiring company is then able to depreciate those assets over a shorter period.
To be able to make a 338(h)(10) election: (1) The acquisition must be in the form of a stock purchase, and the acquiring corporation must acquire greater than 80% of the target corporation’s stock. (2) The target corporation must be a C-corporation. (3) The election must be made on the tax return for the year of the acquisition.
338(h)(10) elections can be confusing and often require the assistance of a qualified team of professionals to ensure a smooth process.
If you would like to learn more about a 338(h)(10) election or would like assistance please reach out to the Professionals at The Center for Financial, Legal, & Tax Planning Inc. at (618) 997-3436.
***The information provided above is for general informational purposes only. It is not to be construed as financial, legal, or tax planning advice.***