Asset vs. Stock Sales: Weighing Tax Consequences of the Buyer and Seller, Section 338 Elections

Whether a sale is structured as an asset sale or a stock sale dramatically impacts the amount realized from the sale of a business. The types of assets sold, whether real estate and intangible assets or tangible assets and inventory, heavily weigh in the decision. Further compounding the choice is whether you are representing, or are, the buyer or the seller in the transaction. Favorable tax consequences for one party can be detrimental to the other.

A few of the benefits of asset sales include being able to price assets individually, not acquiring the company's debt, and, depending on the nature of assets purchased, the ability to write off the purchase price of certain business assets expeditiously using accelerated depreciation or under Section 179.

Benefits of stock sales include not having to price assets individually, allowing the prior owner to separate from the business entirely, and, for the seller, capital gains treatment on the sale. A proper Section 338 election allows certain buyers a step-up in basis for assets purchased via a stock sale.

Listen as our panel of tax and financial experts explains critical considerations when structuring the sale of a business. Businesses and tax advisers need to understand the tax ramifications of choosing an asset or stock sale in order to maximize a seller's gain or minimize a buyer's cost.

1. Asset vs. stock sales: introduction
2. Asset sales
3. Stock sales
4. Special elections
   • Section 338(h)(10)
   • Section 338(g)
5. Reporting requirements
   • Form 8833, Asset Allocation Statement Under Section 338
   • Form 8594, Asset Acquisition Statement Under Section 1060
   • Other
6. Examples

The panel will cover these and other critical issues:

• When a purchaser should consider making an election under Section 338(h)(10)
• Completing Form 8594, Asset Acquisition Statement Under Section 1060
• Tax calculations contrasting asset and stock sales from the seller's and purchaser's perspectives
• The impact of depreciation recapture on a sale of assets

Learning Objectives

After completing this course, you will be able to:

• Identify reporting responsibilities for business sales
• Determine how depreciation recapture impacts an asset sale
• Decide when a purchaser should consider a Section 338 election
• Ascertain key differences in the tax consequences of an asset vs. a stock sale

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Three years+ business or public firm experience preparing complex tax forms and schedules, supervising other preparers or accountants. Specific knowledge and understanding of corporate taxation, including taxation of businesses, accounting methods, net operating losses and loss limitations; familiarity with net operating loss carry-backs and carry-forwards.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.

IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).