Section 338(g) Election for the Acquisition of a Foreign Target Corporation

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A Section 338 election has the effect of recharacterizing a taxable stock acquisition as a deemed asset acquisition. The advantage to the buyer is the step up in the basis of the assets deemed acquired to the fair market value on the date of purchase. In the context of a cross-border acquisition, there are some advantages and disadvantages to making an I.R.C. Section 338(g) election when a U.S. buyer acquires stock of a foreign corporation.

The main possible disadvantage of a Section 338(g) election for a foreign target corporation is the effect of a provision referred to as I.R.C. Section 901(m). …read more

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