Section 336(e) Elections: Tax Basis Step Up Through Deemed Asset Sale Treatment

Structuring Qualifying Stock Dispositions for Partnership and Private Equity Acquirers

Recording of a 90-minute CLE/CPE webinar with Q&A


Conducted on Tuesday, September 26, 2017

Recorded event now available

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Program Materials

This CLE/CPE webinar will provide tax counsel with a thorough and practical guide to utilizing a Section 336(e) step-up election in the acquisition of a target corporation. The panel will contrast the 336(e) election with 338(h)(10) treatment, outline the requirements for qualification, and detail the specific tactics and risks involved in making the election.

Description

The Section 336(e) election is a tax planning tool increasingly used in corporate acquisitions. A relatively recent development, it 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” 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, private equity funds and individuals. Also, stock dispositions may be aggregated over a 12-month period rather than in a single disposition to a single corporate purchaser.

Tax counsel must consider critical differences in the elections when structuring any transaction to qualify for 336(e) treatment. Our panel will provide tax counsel with a thorough and practical guide to utilizing a Section 336(e) step-up election in the acquisition of a target corporation. The panel will contrast the 336(e) election with 338(h)(10) treatment, outline the requirements for qualification, and detail the specific tactics and risks involved in making the election.

Listen as our experienced panel provides a thorough and practical guide to the tax deferral opportunities, risks and drafting requirements in structuring a transaction to qualify for a Section 336(e) election.

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Outline

  1. Basic operation of Section 336(e) election
  2. When and when not to elect 336(e) treatment
  3. Step-up in tax basis of target company assets in an 80% or greater stock acquisition
  4. Differences between a Section 336(e) election and a 338(h)(10) election
  5. Structuring concerns

Benefits

The panel will review these and other key issues:

  • What is a “qualified stock disposition,” and how does it differ when applied to a Section 336(e) election vs. a 338(h)(10) election?
  • Under what circumstances may a stock distribution qualify for Section 336(e) treatment?
  • How should counsel for acquiring parties structure a purchase agreement to protect a purchaser’s right to claim the benefits of making or foregoing a Section 336(e) election?
  • What tactics should tax counsel employ to ensure that a 336(e) election is not voided due to non-recognition of the underlying transaction?

Faculty

Jodz, Meghan
Meghan Jodz

Partner, Tax Services
Grant Thornton

Ms. Jodz heads the M&A tax practice for the Firm's Atlantic Coast Market. She has extensive experience...  |  Read More

Tejeda, Adam
Adam J. Tejeda

Partner
K&L Gates

Mr. Tejeda counsels clients on a wide range of tax matters associated with domestic and international business...  |  Read More

Hellkamp, Lori
Lori A. Hellkamp

Jones Day

Ms. Hellkamp practices across a broad range of U.S. federal taxation matters, including corporate and...  |  Read More

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