Looking for input on Stock Purchase treated as an asset sale.
Currently two weeks from close on a logistics company and trying to understand how to efficiently execute the transaction. After close I need the company to maintain the same name, EIN number, corporate status with state,...
If I forgo the asset sale treatment I lose out on not only the step up in basis, but also goodwill depreciation, which will cost me $2M in depreciation opportunity.
If I change the name of the company being acquired or any detail around it, I will need to get new DOT/MC number from FMCSA, reinstate a bunch of contracts, do a bunch of business set up work that I get to avoid with a stock sale.
My naive understanding of the two:
338(h)(10):
- Buyer must be US C-Corp or an S-Corp
- Buyer and seller must jointly elect
- Buyer must be a Corp making QSP of at least 80%
- Fill out form 8023
336(e):
- Buyer can be individual or trust
- Seller elects
- Buyer must be making QSP of at least 90%
- No designated form to fill out, just need to include a letter.
If I do 338(h)(10) election I would need to
1) Create an LLC w/ S-crop election to use it to purchase the S-Corp
2) Get agreement with seller on purchasing price allocation
3) Purchase company and both submit IRS forms
4) Treat originally LLC as disregarded entity except for when I file taxes
If I do 336e election I would need to:
1) Get agreement with seller on purchase allocation
2) Purchase company and create letter stating we will elect 336(e)
3) Run business as the old seller
In my situation, it feels like 336(e) election is the cleanest and easiest to execute. It also avoids the complication of disregarded entities and just replaces my name with the seller going forward.
Is that right? What am I missing?
S-Corp Stock Sale treated as an asset sale for tax 338(h)(10) vs 336(e)
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by a searcher from The University of Chicago - Booth School of Business
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