hard · Investment Banking ma-lbo
How does a Section 338(h)(10) election affect the creation of a Deferred Tax Liability (DTL) compared to a standard stock purchase?
- It increases the resulting DTL because the tax-basis step-up exceeds the book write-up amount that is recorded.
- It results in a Deferred Tax Asset forming on the balance sheet instead of the usual DTL that a stock deal would create.
- The election has no impact at all on the balance sheet's deferred tax accounts or their resulting valuation basis calculations.
- 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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