338(h)(10) Hybrid Purchase

May 17, 2024

by a searcher from University of Cambridge in Dallas, TX, USA

Yesterday a colleague introduced me to the 338(h)(10) Hybrid election. There seem to be some outstanding benefits for buyers under the right circumstances. I was wondering if anyone has executed one of these, pros/cons of this option, etc.

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Reply by a professional
from Boston College in Baltimore, MD, USA

Hi Michael, very common joint election in the purchase of an S Corporation. More recently, at least in my experience, a majority of the S Corporation acquisitions we do and see utilize a Type F pre-closing reorganization followed by a conversion/Q-Sub election to get the same tax outcome (equity deal treated as an asset purchase for tax purposes) without the limitations of 338(h)(10) and with the additional benefit of (largely) avoiding legacy Subchapter S risks. There are a number of articles out there on both alternatives or happy to chat if you shoot me a DM.

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