One unique aspect of acquisitions involving S Corporation targets is the availability of a Section 338(h)(10) election under the Internal Revenue Code. A 338(h)(10) election allows an acquirer of S Corporation shares to treat the transaction as the acquisition of assets, for federal income tax reporting purposes. This gives the acquirer a “step-up in basis” with respect to the acquired assets, and the corresponding ability to amortize certain assets (e.g., goodwill) over 15 years for tax purposes. The acquirer receives an economic benefit equal to the present value of the future tax deductions.
But what is the economic advantage to the …read more
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