Most corporate buyers of businesses know about the 338(h)(10) tax election available under the Internal Revenue Code. The 338(h)(10) election allows a buyer to structure an acquisition as a stock purchase from a legal standpoint but as an asset purchase from a tax standpoint. A stock purchase may be desired legally to allow for a seamless transition of ownership and in cases where key contracts cannot be transferred. The 338 election allows the buyer in effect to depreciate and/or amortize the purchase price. The 338 election, however, is only available to a purchaser that is a corporation. Many purchasers are limited liability companies taxed as partnerships, not corporations. The 338 election is therefore unavailable. However, another tax election, known as the 336(e) election, is available to non-corporate purchasers. If the 336(e) election is made, the transaction is treated as an asset sale and, as with a 338 election, the purchaser receives a cost basis in the assets acquired equal to the purchase price, which the purchaser can deduct over time. As you can see, the often forgotten cousin of the 338 election, the 336 election, can be a valuable tool to a non-corporate purchaser.
If you have any questions about this or any other M&A issue,
please contact Glenn Solomon at email@example.com or 443-738-1522.
ABOUT GLENN D. SOLOMON
firstname.lastname@example.org | 443-738-1522
Glenn D. Solomon is a principal at Offit Kurman and has provided counsel to businesses and business owners for more than twenty-five years. He has extensive experience in the purchase and sale of businesses, structuring ownership agreements, and advising companies in financial distress.
ABOUT OFFIT KURMAN
Offit Kurman is one of the fastest-growing full-service law firms in the United States. With 14 offices in seven states, and the District of Columbia, and growing by 50% in two years through expansions in New York City and Charlotte, North Carolina, Offit Kurman is well-positioned to meet the legal needs of dynamic businesses and the individuals who own and operate them. For over 30 years, we’ve represented privately held companies and families of wealth throughout their business life cycles.
Whatever and wherever your industry, Offit Kurman is the better way to protect your business, preserve your family’s wealth, and resolve your most challenging legal conflicts. At Offit Kurman, we distinguish ourselves by the quality and breadth of our legal services—as well as our unique operational structure, which encourages a culture of collaboration and entrepreneurialism. The same approach that makes our firm attractive to legal practitioners also gives clients access to experienced counsel in every area of the law.
Find out why Offit Kurman is The Better Way to protect your business, your assets and your family by connecting via our Blog, Facebook, Twitter, Instagram, YouTube, and LinkedIn pages. You can also sign up to receive LawMatters, Offit Kurman’s monthly newsletter covering a diverse selection of legal and corporate thought leadership content.
DELAWARE | MARYLAND | NEW JERSEY | NEW YORK | NORTH CAROLINA | PENNSYLVANIA | VIRGINIA | WASHINGTON, DC