hard · Investment Banking ma-lbo
What is the primary valuation impact of a Section 338(h)(10) election in an M&A transaction?
- It permanently prevents the buyer from ever using any of the target company's existing Net Operating Losses.
- It allows the seller to completely avoid paying all capital gains taxes owed on the sale of the company to the acquiring buyer.
- It eliminates any need for Goodwill to ever be recorded on the pro-forma combined balance sheet after the acquisition deal closes.
- 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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