§ 338.
(a)
General rule
For purposes of this subtitle, if a purchasing corporation makes an election under this section (or is treated under subsection (e) as having made such an election), then, in the case of any qualified stock purchase, the target corporation—
(1)
shall be treated as having sold all of its assets at the close of the acquisition date at fair market value in a single transaction, and
(2)
shall be treated as a new corporation which purchased all of the assets referred to in paragraph (1) as of the beginning of the day after the acquisition date.
(b)
Basis of assets after deemed purchase
(1)
In general
For purposes of subsection (a), the assets of the target corporation shall be treated as purchased for an amount equal to the sum of—
(A)
the grossed-up basis of the purchasing corporation’s recently purchased stock, and
(B)
the basis of the purchasing corporation’s nonrecently purchased stock.
(2)
Adjustment for liabilities and other relevant items
(3)
Election to step-up the basis of certain target stock
(B)
Determination of basis amount
For purposes of subparagraph (A), the basis amount determined under this subparagraph shall be an amount equal to the grossed-up basis determined under subparagraph (A) of paragraph (1) multiplied by a fraction—
(i)
the numerator of which is the percentage of stock (by value) in the target corporation attributable to the purchasing corporation’s nonrecently purchased stock, and
(ii)
the denominator of which is 100 percent minus the percentage referred to in clause (i).
(4)
Grossed-up basis
For purposes of paragraph (1), the grossed-up basis shall be an amount equal to the basis of the corporation’s recently purchased stock, multiplied by a fraction—
(A)
the numerator of which is 100 percent, minus the percentage of stock (by value) in the target corporation attributable to the purchasing corporation’s nonrecently purchased stock, and
(B)
the denominator of which is the percentage of stock (by value) in the target corporation attributable to the purchasing corporation’s recently purchased stock.
(5)
Allocation among assets
(6)
Definitions of recently purchased stock and nonrecently purchased stock
For purposes of this subsection—
(A)
Recently purchased stock
(B)
Nonrecently purchased stock
(f)
Consistency required for all stock acquisitions from same affiliated group
If a purchasing corporation makes qualified stock purchases with respect to the target corporation and 1 or more target affiliates during any consistency period, then (except as otherwise provided in subsection (e))—
(1)
any election under this section with respect to the first such purchase shall apply to each other such purchase, and
(2)
no election may be made under this section with respect to the second or subsequent such purchase if such an election was not made with respect to the first such purchase.
(h)
Definitions and special rules
For purposes of this section—
(1)
12-month acquisition period
(3)
Purchase
(A)
In general
The term “purchase” means any acquisition of stock, but only if—
(i)
the basis of the stock in the hands of the purchasing corporation is not determined (I) in whole or in part by reference to the adjusted basis of such stock in the hands of the person from whom acquired, or (II) under section 1014(a) (relating to property acquired from a decedent),
(ii)
the stock is not acquired in an exchange to which section 351, 354, 355, or 356 applies and is not acquired in any other transaction described in regulations in which the transferor does not recognize the entire amount of the gain or loss realized on the transaction, and
(iii)
the stock is not acquired from a person the ownership of whose stock would, under section 318(a) (other than paragraph (4) thereof), be attributed to the person acquiring such stock.
(B)
Deemed purchase under subsection (a)
(C)
Certain stock acquisitions from related corporations
(ii)
Certain distributions
Clause (i) of subparagraph (A) shall not apply to an acquisition of stock described in clause (i) of this subparagraph if the corporation acquiring such stock—
(I)
made a qualified stock purchase of stock of the related corporation, and
(II)
made an election under this section (or is treated under subsection (e) as having made such an election) with respect to such qualified stock purchase.
(iii)
Related corporation defined
(4)
Consistency period
(A)
In general
Except as provided in subparagraph (B), the term “consistency period” means the period consisting of—
(i)
the 1-year period before the beginning of the 12-month acquisition period for the target corporation,
(ii)
such acquisition period (up to and including the acquisition date), and
(iii)
the 1-year period beginning on the day after the acquisition date.
(B)
Extension where there is plan
(6)
Target affiliate
(B)
Certain foreign corporations, etc.
Except as otherwise provided in regulations (and subject to such conditions as may be provided in regulations)—
(i)
the term “target affiliate” does not include a foreign corporation or a DISC, and
(ii)
stock held by a target affiliate in a foreign corporation or a domestic corporation which is a DISC or described in section 1248(e) shall be excluded from the operation of this section.
[(7)
Repealed. [Pub. L. 100–647, title I, § 1006(e)(20)], Nov. 10, 1988, [102 Stat. 3403]]
(8)
Acquisitions by affiliated group treated as made by 1 corporation
(9)
Target not treated as member of affiliated group
(10)
Elective recognition of gain or loss by target corporation, together with nonrecognition of gain or loss on stock sold by selling consolidated group
(A)
In general
Under regulations prescribed by the Secretary, an election may be made under which if—
(i)
the target corporation was, before the transaction, a member of the selling consolidated group, and
(ii)
the target corporation recognizes gain or loss with respect to the transaction as if it sold all of its assets in a single transaction,
then the target corporation shall be treated as a member of the selling consolidated group with respect to such sale, and (to the extent provided in regulations) no gain or loss will be recognized on stock sold or exchanged in the transaction by members of the selling consolidated group.
(B)
Selling consolidated group
For purposes of subparagraph (A), the term “selling consolidated group” means any group of corporations which (for the taxable period which includes the transaction)—
(i)
includes the target corporation, and
(ii)
files a consolidated return.
To the extent provided in regulations, such term also includes any affiliated group of corporations which includes the target corporation (whether or not such group files a consolidated return).
(C)
Information required to be furnished to the Secretary
Under regulations, where an election is made under subparagraph (A), the purchasing corporation and the common parent of the selling consolidated group shall, at such times and in such manner as may be provided in regulations, furnish to the Secretary the following information:
(i)
The amount allocated under subsection (b)(5) to goodwill or going concern value.
(ii)
Any modification of the amount described in clause (i).
(iii)
Any other information as the Secretary deems necessary to carry out the provisions of this paragraph.
(11)
Elective formula for determining fair market value
[(12)
Repealed. [Pub. L. 99–514, title VI, § 631(e)(5)], Oct. 22, 1986, [100 Stat. 2273]]
(13)
Tax on deemed sale not taken into account for estimated tax purposes
[(14)
Repealed. [Pub. L. 108–27, title III, § 302(e)(4)(B)(i)], May 28, 2003, [117 Stat. 763]]
(15)
Combined deemed sale return
(16)
Coordination with foreign tax credit provisions
(Added [Pub. L. 97–248, title II, § 224(a)], Sept. 3, 1982, [96 Stat. 485]; amended [Pub. L. 97–448, title III, § 306(a)(8)(A)(i)], Jan. 12, 1983, [96 Stat. 2402]; [Pub. L. 98–369, div. A, title VII, § 712(k)(1)]–(5)(D), (6), (7), July 18, 1984, [98 Stat. 948–952]; [Pub. L. 99–514, title VI, § 631(b)], (e)(5), title XII, § 1275(c)(6), title XVIII, §§ 1804(e)(8)(A), 1899A(7), Oct. 22, 1986, [100 Stat. 2272], 2273, 2599, 2804, 2958; [Pub. L. 100–647, title I], §§ 1006(e)(20), 1012(bb)(5)(A), 1018(d)(9), Nov. 10, 1988, [102 Stat. 3403], 3535, 3581; [Pub. L. 101–508, title XI, § 11323(c)(1)], Nov. 5, 1990, [104 Stat. 1388–465]; [Pub. L. 108–27, title III, § 302(e)(4)(B)(i)], May 28, 2003, [117 Stat. 763]; [Pub. L. 108–357, title VIII, § 839(a)], Oct. 22, 2004, [118 Stat. 1597]; [Pub. L. 115–141, div. U, title IV, § 401(a)(64)], (d)(1)(D)(vii), Mar. 23, 2018, [132 Stat. 1187], 1207.)