Section 338 permits a parent corporation to elect to treat the purchase of stock of a subsidiary as a purchase of assets "to obtain the same basis that it would have obtained had it purchased the assets directly" (fair market value).The subsidiary must liquidate when the parent elects § 338.

Question

Quizplus · Accepted Answer

Section 338 allows a parent corporation to treat the stock purchase as an asset purchase for tax purposes, but it does not require the subsidiary to liquidate. The subsidiary can continue its operations.

Section 338 Permits a Parent Corporation to Elect to Treat