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

Structuring Qualifying Stock Dispositions for Partnership and Private Equity Acquirers

A live 90-minute CLE/CPE webinar with interactive Q&A


Tuesday, September 26, 2017 (in 4 days)
1:00pm-2:30pm EDT, 10:00am-11:30am PDT


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.

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?

Learning Objectives

After completing this course, you will be able to:

  • Determine when making a Section 336(e) election would be beneficial to purchasers in an acquisition transaction
  • Discern the critical differences in application between a 336(e) election and a Section 338(h)(10) election
  • Identify drafting language and transaction structures essential to preserving 336(e) benefits
  • Recognize basis factors unique to S corporation targets in a 336(e) acquisition

Faculty

Meghan Jodz, Partner, Tax Services
Grant Thornton, Philadelphia

Ms. Jodz heads the M&A tax practice for the Firm's Atlantic Coast Market. She has extensive experience working in M&A with both financial and strategic buyers conducting tax due diligence reviews and has significant technical expertise in S corporations, deal structuring, section 382 ownership changes, consolidated stock basis and accounting methods. She also has extensive experience in accounting for income taxes for both private and public companies and advises on the financial statement implications of M&A transactions.

Adam J. Tejeda, Partner
K&L Gates, New York

Mr. Tejeda counsels clients on a wide range of tax matters associated with domestic and international business transactions. He focuses his practice primarily on tax planning in connection with inbound and outbound investments; cross-border financings; domestic and cross-border mergers and acquisitions; multinational IP planning; advising US based clients with regards to Subpart F; corporate and tax aspects of joint ventures and other partnership issues; hedge fund and private equity fund structures; tax planning with respect to the tax consequences of overseas operations of U.S. multi-nationals; and internal reorganizations. 

Lori A. Hellkamp
Jones Day, Washington, D.C.

Ms. Hellkamp practices across a broad range of U.S. federal taxation matters, including corporate and international taxation and M&A. Her practice has a particular emphasis on international tax planning, compliance, and tax-efficient structures for cross-border transactions and restructurings. She counsels corporations facing a variety of federal and multijurisdictional tax issues, both internally and before the Internal Revenue Service. She has helped clients obtain favorable private letter rulings; seek competent authority assistance; enter into advance pricing agreements; resolve disputes at Appeals; and navigate complex tax treaty, transfer pricing, FIRPTA, and FATCA issues. 


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Continuing Professional Education credit processing is available for an additional fee per person. You may register for CPE credit processing at any time before or after the program. To qualify for CPE you may not listen via the telephone.

This program is eligible for 1.5 CPE credits.

  • Field of Study: Taxes.
  • Level of Knowledge: Intermediate.
  • Advance Preparation: None.
  • Teaching Method: Seminar/Lecture.
  • Delivery Method: Group-Internet (via computer).
  • Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of verification codes announced throughout the presentation.
  • Prerequisite: Three years+ business or professional firm experience at mid-level within the organization, preparing complex tax structures for businesses; supervisory authority over other professionals. Knowledge and understanding of business structures, purchase price allocation, tax indemnification provisions. Familiarity with basic concepts related to assets and stock sales.

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Tax Law Advisory Board

Robert S. Barnett

Partner

Capell Barnett Matalon & Schoenfeld

William H. Byrnes

Associate Dean, Special Projects

Texas A&M University Law

Robert A.N. Cudd

Senior Partner

Polsinelli

Patrick Derdenger

Tax Partner

Steptoe & Johnson

Janice Eiseman

Principal

Cummings & Lockwood

Lynn Fowler

Partner

Kilpatrick Townsend & Stockton

Edward Froelich

Of Counsel

Morrison & Foerster

Daniel L. Gottfried

Partner

Hinckley Allen

J. Leigh Griffith

Partner and Practice Group Leader - Tax

Waller Lansden Dortch & Davis

L. Andrew Immerman

Partner

Alston & Bird

Mark S. Lange

Partner

BakerHostetler

Joseph C. Mandarino

Partner

Smith Gambrell & Russell

Lori Mathison

Partner, Cross-Border Transactions Tax

Fraser Milner Casgrain

Christian M. McBurney

Partner

Arent Fox

Suzanne Ross McDowell

Partner, Tax-Exempt Organizations

Steptoe & Johnson

Todd Reinstein

Partner, Corporate Tax and Due Diligence

Pepper Hamilton

Alex Sadler

Partner

Morgan Lewis

Susan Seabrook

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Buchanan Ingersoll & Rooney

Peter Stathopoulos

Managing Director, State and Local Tax Practice

Bennett Thrasher

Eric Tresh

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Sutherland Asbill & Brennan

Amanda Wilson

Shareholder

Lowndes Drosdick Doster Kantor & Reed

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