Careful attention to tax considerations during the course of
acquisition transactions can help secure opportunities to protect
and enhance value for private equity funds. While there are
numerous tax issues to consider in any transaction, below are some
key considerations.
Identifying Structuring Opportunities Through Tax
Elections
338(h)(10) Elections for Qualified Targets
An election under Section 338(h)(10) of the Internal Revenue
Code allows a corporate buyer to acquire stock while realizing the
tax benefits of an asset purchase if the target is (i) a member of
a consolidated group (or a non-consolidated selling affiliate) or
(ii) an S corporation, and the private equity fund's corporate
buyer acquires a minimum percentage of the target's stock by
vote and value (after excluding any non-voting, non-convertible
preferred stock) within a defined acquisition period.
However, in certain circumstances a Section 338(h)(10) election may
cause the seller to incur
