medium · Investment Banking

How does a Section 338(h)(10) election affect the creation of a Deferred Tax Liability (DTL) compared to a standard stock purchase?

1. It increases the DTL because the tax step-up is larger than the book write-up.
2. It results in a Deferred Tax Asset (DTA) instead of a DTL.
3. The election has no impact on the balance sheet's deferred tax accounts.
4. It typically eliminates the need for a DTL on asset write-ups because the tax basis is stepped up to match the book basis.

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