What is Section 338(h)(10) election?
In short
When a corporation buys at least 80% of a target's stock from a consolidated group or from S corporation shareholders, a joint section 338(h)(10) election treats the deal for tax as a sale of the target's assets followed by a liquidation.
Key takeaways
- The buyer gets a stepped-up basis in the target's assets.
- The sellers bear tax as if the assets were sold, at a single level.
- A section 336(e) election gives a similar result in some deals that don't qualify.
Where it's tested
TCP: Distributions, Redemptions & Liquidations — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
A shareholder owns 70% of a corporation's stock. Following a redemption, she owns 52%. Ignoring attribution, does the redemption qualify as substantially disproportionate?