Section 338 Election and an Inventory Sale
Section 338 Election and an Inventory Sale. Harrison Corporation, a C corporation, is part of a consolidated group, with assets consisting of inventory with a pre-transaction tax basis of $3,200 and value of $40,000. Harrison also has $3,200 of liabilities. Debra Smith acquires 100% of Harrison’s outstanding stock for $36,800, and the parties make a Sec. 338(h)(10) election. Prepare a letter to Debra that answers the following questions:
- What is Harrison Corp.’s adjusted grossed-up basis (AGUB)?
- What is the inventory’s allocated tax basis?
- How much gain will be realized when the inventory is sold?
Include your calculations in the memo or attach a spreadsheet showing your calculations.
No hard coding of solutions.
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- Be sure to discuss and reference concepts taken from the assigned textbook reading and relevant research.
- Support your paper with at least 6 tax, scholarly, legislative, or court references (of which the textbook may be one).
Your paper should be 5 pages in length and conform to the APA format.
Include at least 5 scholarly references in addition to the course textbook.
Chapter 20 in South-Western Federal Taxation 2019
Aggregate Deemed Sale Price; Various Aspects of Taxation of the Deemed Asset Sale, 26 CFR 1.338-4
Caiazza, S., & Pozzolo, A. (2016). The determinants of failed takeovers in the banking sector: Deal or country characteristics? Journal of Banking & Finance, 72(SS), S92-S103.
Seago, W. E., & Schnee, E. J. (2018). Post-reorganization transactions and the step transaction doctrine. Journal of Taxation, 128(1), 6-13.
Certain stock purchases treated as asset acquisitions, 26 U.S. Code § 338(h)(10) (n.d.). Retrieved from Thomson Reuters Checkpoint database.
Complete liquidations of subsidiaries, 26 U.S. Code § 332 (n.d.). Retrieved from Thomson Reuters Checkpoint database.
Section 338 Election and an Inventory Sale
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