Section 338 Election

A Section 338 Election allows a corporate buyer to treat a stock purchase of a target company as if they bought the company’s assets directly. When this election is made, the buyer can step up the tax basis of the company's assets to their fair market value, potentially reducing future taxable gains and increasing depreciation or amortization deductions. This option is often used in mergers or acquisitions to optimize tax benefits and facilitate a more advantageous financial structure. It requires the seller's consent and must be properly filed with tax authorities within a specified time frame.