hard · Private Equity & LBOs
An S-Corp is sold for 200M. The buyer wants a 338(h)(10) election to get a100M step-up. The seller's tax basis is $50M. In a stock sale, the seller pays 20% capital gains. In a 338(h)(10), $40M of the gain is recharacterized as ordinary income at 40%.
What is the gross-up payment required to make the seller indifferent?
- $12M
- $16M
- $8M
- $4M
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