Legal Blog

M & A Nuggets: The 338 Election- Important Rules


shutterstock_244361152The last nugget discussed a valuable tax tool known as the Section 338 (h)(10) election, by which the parties can elect to treat a stock purchase as an asset purchase for tax purposes.  There are important rules that must be followed in order to utilize this valuable tool.  First, the purchaser must acquire at least 80% of the seller’s total voting stock and 80% of the total stock, voting and non-voting.  Second, that stock purchase, which can occur in a series of more than one transaction, must occur during a twelve (12) month period.  Last, the purchaser and seller must timely elect to use Section 338 (h)(10).  The deadline to file that election with the Internal Revenue Service is the fifteenth day of the ninth month after the month in which the transaction occurs.  Unlike many other requirements of the Internal Revenue Code, the requirements of the 338 election are relatively easy to comply with.


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Glenn D. Solomon Esq., is a principal at the law firm of Offit Kurman and has provided counsel to businesses and business owners for more than twenty-five years, with extensive experience in the purchase and sale of businessesstructuring ownership agreements, and advising companies in financial distress






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