medium · Investment Banking

What happens to the target's existing deferred tax assets (DTAs) resulting from prior year Net Operating Losses (NOLs) in a Section 338(h)(10) election?

1. They are written off because the underlying NOLs are lost.
2. They are converted into goodwill.
3. They carry over and can be used to offset the buyer's future income.
4. They are added to the new asset step-up.

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