hard · Investment Banking

What is the primary valuation impact of a Section 338(h)(10) election in an M&A transaction?

1. It prevents the buyer from using any of the target's existing Net Operating Losses (NOLs).
2. It allows the seller to avoid all capital gains taxes on the sale of the company.
3. It eliminates the need for any Goodwill to be recorded on the pro-forma balance sheet.
4. It allows a stock purchase to be treated as an asset purchase for tax purposes, creating a step-up in basis for the buyer.

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