IRC 336(e) Elections for S Corporation Targets: Basis Step-Up Treatment for Qualified Stock Dispositions

Timing Requirements, Identifying Eligible Dispositions, Form 8883 Reporting

A live 110-minute CPE webinar with interactive Q&A


Wednesday, August 22, 2018 (in 4 days)

1:00pm-2:50pm EDT, 10:00am-11:50am PDT

or call 1-800-926-7926

This webinar will provide tax advisers with a thorough and practical guide to the planning opportunities and compliance challenges of utilizing a Section 336(e) step-up election in the acquisition of a target S corporation. The panel will contrast the 336(e) election with 338(h)(10) treatment, outline the requirements for qualification, and detail the reporting issues and risks involved in making the election.

Description

The Section 336(e) election allows acquirers of a company to achieve a step-up in the tax basis of the target company’s assets. Similar to the longer established Section 338(h)(10) election, the 336(e) election allows equivalent tax consequences across a broader spectrum of target companies with a simpler transaction structure.

A 336(e) election permits a purchaser to treat a “qualified stock disposition” (QSD) as a purchase of the target’s assets. Unlike Section 338(h)(10), which is only available to corporations purchasing other corporations, a 336(e) election is available to partnerships, S corporations and individuals. An S corporation stock disposition may qualify as a QSD if 80% or more of the vote and value of the stock is disposed of in a single or series of specified transactions.

The rules governing whether a disposition meets the criteria for step-up treatment can be complicated, with some everyday transactions excluded from being considered a QSD. Additionally, there are challenges with determining the eligible date range for making required elections, as well as traps in identifying the tax impact of QSDs where less than 100% of the S corporation stock is disposed.

Tax advisers must have a grasp of the specific rules and reporting requirements of making a 336(e) election to avoid costly tax consequences due to a QSD failure.

Listen as our experienced panel provides a thorough and practical guide to the planning opportunities and reporting challenges of making a Section 336(e) step-up election in the acquisition of a target S corporation.

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Outline

  1. The basic operation of Section 336(e) election
  2. Contrast with a 338(h)(10) election
  3. Qualifying stock distribution (QSD) rules
    1. Transaction or series of disposition transactions
    2. Tax-free transactions ineligible for QSD treatment under Treas. Reg. 1.336-1(b)(5)
    3. Other exceptions
    4. Step-up in tax basis of target company assets in an 80% or higher stock acquisition
  4. Deemed transactions triggered by 336(e) election
  5. Timing issues in making elections
  6. Mechanics of making a 336(e) election
  7. Reporting challenges
    1. Ensuring election is documented timely to avoid the need for PLR
    2. Valuation requirements
    3. Adapting form 8883 to report QSDs

Benefits

The panel will review these and other high priority issues:

  • Under what circumstances may a stock distribution qualify for Section 336(e) treatment as a QSD?
  • What are the critical timing challenges tax advisers and compliance professionals face in preserving the right to make a 336(e) election without a Private Letter Ruling?
  • Valuation and reporting challenges on Form 8883
  • What transactions are deemed to occur upon a 336(e) election?
  • Potential tax consequences for remaining S corporation stockholders when less than 100% of the stock is disposed

Faculty

Bridgers, Griffin
Griffin H. Bridgers

Atty
Hutchins & Associates

Mr. Bridgers' practice encompasses all areas of private wealth and family business. In addition to estate...  |  Read More

Phillips, Stephen
Stephen L. Phillips

Senior Partner / CFO
Phillips Golden

Mr. Phillips heads the firm's tax practice and has spent his career as a tax, business, and corporate partner in...  |  Read More

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