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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ABOUT GLENN D. SOLOMON

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

 

 

 

 

ABOUT OFFIT KURMAN

Offit Kurman is one of the fastest-growing, full-service law firms in the Mid-Atlantic region. With 120 attorneys offering a comprehensive range of services in virtually every legal category, the firm is well positioned to meet the needs of dynamic businesses and the people who own and operate them. Our eight offices serve individual and corporate clients in the Maryland, Delaware, New Jersey, and Northern Virginia markets, as well as the Washington DC, Baltimore, Philadelphia, and New York City metropolitan areas. At Offit Kurman, we are our clients’ most trusted legal advisors, professionals who help maximize and protect business value and personal wealth. In every interaction, we consistently maintain our clients’ confidence by remaining focused on furthering their objectives and achieving their goals in an efficient manner. Trust, knowledge, confidence—in a partner, that’s perfect.

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