Series 79: Section 338(h)(10) Election

Taken from our FINRA Investment Banking Exam

Definition of the term Section 338(h)(10) Election...

an election made to the IRS by the buyer and seller in an M&A transaction, who must make the election jointly. It allows a stock purchase of a subsidiary to be treated for most tax purposes as an asset purchase instead. As a result, the buyer gets a stepped-up basis in the subsidiary. But unlike a standard asset purchase, the seller usually avoids double taxation of the transaction’s proceeds.

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