If the acquirer invokes a 338 election no taxes will have to be paid on any gains on assets written up to their fair market value.

Question

Quizplus · Accepted Answer

A Section 338 election allows the acquirer of a company to treat the purchase as an asset acquisition for tax purposes, which generally results in a step-up in the basis of the acquired assets to their fair market value. However, this step-up may lead to higher depreciation or amortization deductions in future years, not the avoidance of taxes on gains. Taxes may still be due on the sale or disposition of assets in the future based on the new, higher basis.

If the Acquirer Invokes a 338 Election No Taxes Will