Discussion: Taxable Acquisition Transactions and Nontaxable Reorganizations

IRC Section 338 allows a deemed sale election generating immediate taxation to the target corporation and a stepped-up or stepped-down basis to the price paid by the acquiring corporation for the target corporation stock plus liabilities on the deemed sale. Examine at least one benefit of a Section IRC 338 liquidation election for a target corporation. Create a situation which demonstrates a favorable Section IRC 338 liquidation election for a target corporation. Identify one consequence of a nontaxable reorganization, and offer an alternative to eliminate the negative effect of the identified consequence.