Section 338 Election Clause Samples
A Section 338 Election clause allows a buyer and seller in a corporate acquisition to treat a stock purchase as an asset purchase for federal income tax purposes. In practice, this means that although the buyer acquires the target company's stock, both parties agree to file an election with the IRS so that the transaction is taxed as if the buyer had purchased the company's assets directly. This enables the buyer to step up the tax basis of the acquired assets, potentially resulting in future tax benefits such as increased depreciation deductions. The core function of this clause is to provide tax flexibility and optimize the tax outcomes of a corporate acquisition for the parties involved.
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Section 338 Election. (a) With respect to the sale of the Company, the Buyer and the Seller shall jointly make a Section 338(h)(10) Election in accordance with applicable laws and as set forth herein. The Buyer and the Seller shall cooperate with each other and take all necessary steps to properly make a Section 338(h)(10) Election in accordance with applicable laws. The Buyer and the Seller agree to cooperate in good faith with each other in the preparation and timely filing of the Section 338 Forms and any Tax Returns required to be filed in connection with the making of such an election, including the exchange of information and the joint preparation and filing of Form 8023 and related schedules. The Buyer and the Seller agree to report the transfers under this Agreement consistent with such elections and shall take no position contrary thereto unless required to do so by applicable tax law.
(b) The Buyer shall be responsible for the preparation and filing of all Section 338 Forms in accordance with applicable laws and the terms of this Agreement and shall deliver such Section 338 Forms to the Seller at least thirty (30) days prior to the date such Section 338 Forms are required to be filed. The Seller shall have the opportunity to review and approve such documents or forms (such approval not to be unreasonably withheld or delayed) and once approved, execute and deliver to the Buyer such documents or forms (including executed Section 338 Forms) as are required by any laws in order to properly complete the Section 338 Forms within ten (10) days of delivery by the Buyer. The Seller shall provide the Buyer with such information as the Buyer reasonably requests in order to prepare the Section 338 Forms within thirty (30) days of the Buyer’s request for such information.
(c) The aggregate consideration payable under this Agreement (as adjusted pursuant to Section 2.4), Liabilities of the Company and other relevant items shall be allocated in accordance with Section 338(b)(5) of the Code and the Treasury Regulations thereunder. The Buyer shall prepare such allocation (the “Section 338(h)(10) Allocation Schedule”) and shall deliver the Section 338(h)(10) Allocation Schedule to the Seller within five (5) days after the final determination of Net Working Capital pursuant to Section 2.4.
Section 338 Election. Neither Buyer nor any Affiliate of Buyer will make an election under Section 338 of the Code (or any similar election for state or local Tax purposes) with respect to the Company or its Subsidiaries with respect to any transactions contemplated by this Agreement.
Section 338 Election. Section 11.5(a)........................................62
Section 338 Election. Parent shall not make any election under Section 338 of the Code with respect to the acquisition of the Common Stock pursuant to this Agreement.
Section 338 Election. No election under Section 338 of the Code has been made by or with respect to any of the Parent or its Subsidiaries or any of their respective assets or properties.
Section 338 Election. Purchaser shall retain the right of making an irrevocable election under §338 of the Code and the regulations promulgated thereunder in connection with the purchase and sale of the Shares of the Subject Companies hereunder (“Section 338 Election”). The terms, conditions and procedures relating to the Section 338 Election, if made, shall be in accordance with the following:
(a) If Purchaser makes a Section 338 Election for any or all of the Subject Companies, then ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇▇ shall indemnify and hold harmless, and reimburse the Shareholders and Seller for any incremental Taxes (including any interest, penalties and or other statutory additions to Tax) that may be incurred by the Shareholders and Seller by reason of the Section 338 Election being made which computation shall be based upon the difference between:
(i) the after-Tax proceeds that the Shareholders and Seller would have realized after payment of all federal, state and local Taxes attributable to their sale of stock of the Company to Purchaser in a transaction in which no Section 338 Election had been made; and
(ii) the actual after-Tax proceeds realized after payment of all federal, state and local Taxes attributable to their sale of stock of the Company to Purchaser (taking into account, without limitation, the additional Tax liability resulting from and/or attributable to, the Section 338 Election, and including Tax liability resulting from the reimbursement hereunder).
(b) The intent of this Section is to provide the same after-Tax proceeds to Shareholders and Seller if Purchaser makes a Section 338 Election with respect to the Subject Companies as would be realized by Shareholders and Seller if no Section 338 Election had been made, and shall be interpreted in accordance with such intent. The adjustment resulting from this Section is generally referred to herein as the “338 Tax Adjustment”.
(c) The Parties agree that the Purchase Price and the liabilities of the Subject Companies (plus other relevant items) will be allocated to the assets of the Subject Companies for all purposes (including Tax and financial accounting purposes) in a manner consistent with Code §338 and §1060 and the regulations there under. Purchaser and the Subject Companies shall file all Tax Returns (including amended returns and claims for refund) and information reports in a manner consistent with such allocation.
(d) Shareholders and Seller shall provide Purchaser with a schedule computing the amount of the Tax re...
Section 338 Election. Purchaser shall not make, nor permit its Affiliates to make, any election under Section 338 of the Code (or any analogous provision of state, local or non-U.S. Law) with respect to the sale of any Group Company.
Section 338 Election. Notwithstanding anything to the contrary contained in this Agreement, if Purchaser or any Affiliate of Purchaser acquires or becomes the owner, for U.S. federal income tax purposes, of any Company Shares (other than Company Shares held by Holdings) at any time that Holdings is the owner, for U.S. federal income tax purposes, of any Company Shares, neither Purchaser nor any Affiliate of Purchaser shall make, or permit to be made, an election under Section 338 of the Code with respect to such Company Shares or with respect to any of the transactions contemplated by this Agreement, unless the Company provides prior express written consent to any such election.
Section 338 Election. No election under Section 338 has been made by or with respect to any of the Acquired Corporations or any of their respective assets or properties within the last three taxable years.
Section 338 Election. (i) Seller and Buyer will make a joint election under Section 338(h)(10) of the Code, and, at the request of Buyer, any corresponding elections under state, local or foreign Tax Law, with respect to the purchase and sale of the Stock under this Agreement. Seller will allocate the “aggregate deemed sales price” as computed under applicable Treasury Regulations among the Acquired Companies’ assets in accordance with Section 5.12(b)(iii). Seller and Buyer agree to take all actions necessary or appropriate, including properly completing and executing IRS Form 8023, to make the election under Section 338(h)(10) of the Code and (if requested by Buyer) and comparable applicable state Law for the Acquired Companies.
(ii) Buyer will have the initial responsibility for the timely preparation of IRS Form 8023, and the comparable form under applicable state, local or foreign Law, and all supporting statements, schedules, and required information applicable thereto. Such Form 8023, comparable state, local or foreign forms, statements, schedules and information (the “Form 8023 Package”) will be submitted to Seller for its review no later than 45 days after the Closing Date. Within 30 days after Seller receives the Form 8023 Package, Seller will notify Buyer of any objections or proposed changes. If Seller has no objections or proposed changes or if Seller and the Buyer agree on the resolution of all objections or proposed changes, Seller and Buyer will promptly file the Form 8023 and the relevant attachments with the IRS via certified mail with return receipt requested. As soon as practicable thereafter, Seller and Buyer will furnish to each other a photocopy of such certificate of mailing and return receipt. If Buyer and Seller fail to agree with respect to any objection or proposed change within 20 days after Buyer receives notice of objection from Seller, then any disputed objection(s) or proposed change(s) will be submitted for resolution to a national accounting firm reasonably acceptable to each Party, which will report its final determination to Buyer and Seller within 30 days thereafter, and such accountants’ determination as to the appropriateness and extent of changes (if any) to the Form 8023 Package will be final and binding. The costs of such accountants’ determination will be borne equally by Buyer and Seller. Within three days after such determination, Buyer and Seller will file the Form 8023 and the relevant attachments with the IRS in accordance with th...