The IRS and Treasury Department recently issued regulations that
provide rules for making a "Section 336(e) election."
This election is a relatively new tax-planning tool to achieve a
step-up in the tax basis of the target corporation's assets for
income tax purposes where an asset purchase or a deemed asset
purchase under Section 338 of the Internal Revenue Code is not
available. A Section 336(e) election combines substantially similar
tax consequences as a Section 338(h)(10) election (i.e., a step-up
in the tax basis of the target corporation's assets) with a
simpler transaction structure.
Specifically, in a Section 338(h)(10) election, the purchaser
must be a corporation, whereas a Section 336(e) election may be
made where a target corporation is purchased by partnerships,
limited liability companies, individuals or a combination thereof.
This means that, in acquiring stock of a target corporation, a
private equity fund would not be required to incur the cost
