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Practice CPA®CPA TCP Practice ExamQuestion 59

Medium1 markMultiple Choice

Area 4: Entity Tax PlanningTCPEntity TaxMergers and Acquisitions

CPA · Question 59 · Area 4: Entity Tax Planning

Corporation P acquires 100% of the stock of Target T for cash. P wants to treat the stock purchase as an asset purchase to step up the basis of T's assets. Which election should P make?

Answer options:

A.

Section 351 election

B.

Section 338(g) or 338(h)(10) election

C.

Section 754 election

D.

Section 1362 election

How to approach this question

1. Identify Goal: Step-up basis in assets after stock purchase.<br/>2. Identify Code Section: IRC §338.<br/>3. Result: Section 338 election.

Full Answer

B.Section 338(g) or 338(h)(10) election✓ Correct

A Section 338 election allows a qualified stock purchase to be treated as an asset acquisition for tax purposes.

Common mistakes

Confusing with partnership 754 election.

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