Section 338(h)(10) Joint Election

§ 338. Certain stock purchases treated as asset acquisitions(a) General ruleFor 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 generalFor 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 itemsThe amount described in paragraph (1) shall be adjusted under regulations prescribed by the Secretary for liabilities of the target corporation and other relevant items. (3) Election to step-up the basis of certain target stock(A) In generalUnder regulations prescribed by the Secretary, the basis of the purchasing corporation’s nonrecently purchased stock shall be the basis amount determined under subparagraph (B) of this paragraph if the purchasing corporation makes an election to recognize gain as if such stock were sold on the acquisition date for an amount equal to the basis amount determined under subparagraph (B). (B) Determination of basis amountFor 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 basisFor 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 assetsThe amount determined under paragraphs (1) and (2) shall be allocated among the assets of the target corporation under regulations prescribed by the Secretary.