Paperwork Reduction Act Notice.
We ask for the information on this form to carry out the Internal
Revenue laws of the United States. You are required to give us the
information. We need it to ensure that you are complying with these
laws and to allow us to figure and collect the right amount of tax.
You are not required to provide the information requested on a form
that is subject to the Paperwork Reduction Act unless the form
displays a valid OMB control number. Books or records relating to a
form or its instructions must be retained as long as their contents
may become material in the administration of any Internal Revenue law.
Generally, tax returns and return information are confidential, as
required by section 6103.
The time needed to complete and file this tax form will vary
depending on individual circumstances. The estimated average time is:
Recordkeeping
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14 hr., 7 min.
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Learning about the law or the form
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2 hr., 17 min.
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Preparing and sending the form to the IRS
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2 hr., 37 min.
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If you have comments concerning the accuracy of these time
estimates or suggestions for making this form simpler, we would be
happy to hear from you. You can write to the Tax Forms Committee,
Western Area Distribution Center, Rancho Cordova, CA 95743-0001.
DO NOT send this form to this address. Instead, see
When and Where To File on page 1.
General Instructions
Purpose of Form
The purpose of Form 8023 is to permit elections to be made under
section 338 for a corporation (the target corporation) if the
purchasing corporation has made a qualified stock purchase (QSP) of
the target corporation.
If a section 338(a) election is made for the target, the target is
treated for purposes of Subtitle A of the Code as having sold all of
its assets on the acquisition date and then as having purchased the
assets as a new corporation (new target) on the day after the
acquisition date. (For periods on or before the acquisition date, the
target is sometimes referred to as the old target.) In
addition, the target must recognize gain or loss on the deemed sale of
its assets (the deemed sale gain).
If a section 338(h)(10) election is made for the target, the target
generally is treated as making the deemed sale and liquidating. The
treatment of the target shareholders generally is consistent with the
sale and liquidation treatment. A section 338(h)(10) election cannot
be made for a target corporation unless it is acquired from a selling
consolidated group, a selling affiliate (as defined in Regulations
section 1.338(h)(10)-1(c)(4)), or an S corporation shareholder (or
shareholders).
Who Must File
Persons making elections under section 338 must file Form 8023.
Generally, a purchasing corporation must file Form 8023 for the
target. If a section 338(h)(10) election is made for a target, Form
8023 must be filed jointly by the purchasing corporation and the
common parent of the selling consolidated group (or the selling
affiliate or S corporation shareholder(s)).
When and Where To File
File Form 8023 by the 15th day of the 9th month beginning after the
acquisition date to make a section 338 election for the target
corporation. File Form 8023 with the District Director (Attention:
Chief of Examination) for the Internal Revenue district where the main
corporate office (headquarters) of the purchasing corporation is
located (or, if the purchasing corporation is a member of a
consolidated group, with the District Director (as identified above)
of the common parent of the consolidated group). If an affiliated
group that does not file consolidated returns makes its QSP of the
target through more than one member, a section 338 election for the
target is made by filing Form 8023 with the District Director (as
identified above) of the affiliate that acquired the largest
percentage (by value) of the target stock in the QSP (or, if there is
more than one such affiliate, file Form 8023 with the District
Director of any one such affiliate).
A copy of Form 8023 must be attached to the final income tax return
of the old target, to the first income tax return of the new target,
and to the income tax return of the purchasing corporation for its tax
year that includes the acquisition date; but failure to do so will not
invalidate a section 338 election. If a section 338(h)(10) election
is made, a copy of Form 8023 is considered to be attached to the final
income tax return of the old target if a copy of Form 8023 is attached
to the income tax return of the selling consolidated group (or the
selling affiliate) for the tax year of the seller that includes the
acquisition date (or, in the case of a target that is an S
corporation, attach Form 8023 to the final income tax return of the S
corporation with additional copies distributed to each electing S
corporation shareholder with his or her Schedule K-1 (Form 1120S)).
Electing for Multiple Targets
One Form 8023 (rather than multiple Forms 8023) may be used for
targets that each have the same acquisition date, were members of the
same affiliated group immediately before the acquisition date, and are
members of the same affiliated group immediately after the acquisition
date. All of the information that would be required for the additional
targets if a separate Form 8023 were filed must be provided for that
target in schedules attached to the form. If a form is used to make an
election under section 338 for more than one target, check line 15. In
an attached schedule, provide the information requested in Sections
A-1, A-2, B, C, D, E, and F for each target corporation other than the
one shown in Section B of the form. In the schedule, also state which
elections are made for each target (i.e., information corresponding to
lines 12, 13, and 14 of Section G). Include the appropriate signature
or signature attachment for each target. See Signature on
page 3.
Some special instructions apply to section 338 elections for
lower-tiered targets, whether one or more Forms 8023 are filed to make
the elections. For example, if P purchases target A, target A owns
target B, and P makes a section 338 election for target A, resulting
in a deemed QSP of target B, these special instructions apply to make
a section 338 election for the target B. To make an election for
target B: (1) for purposes of completing and signing Form
8023 treat the purchasing corporation(s) of the directly purchased
target as the purchasing corporation(s) of the lower-tiered target and
(2) file Form 8023 with the District Director (as
identified above) of the purchasing corporation of the directly
purchased target.
Definitions
Qualified stock purchase.
A QSP is the purchase of at least 80% of the total voting
power and value of the stock of a corporation by another corporation
during a 12-month acquisition period. Preferred stock (as described in
section 1504(a)(4)) is not included in computing voting power or
value. See section 338(h)(3) for the definition of purchase.
Acquisition date.
The acquisition date is the first day on which a QSP has occurred.
12-month acquisition period.
In general, the 12-month acquisition period is the 12-month period
beginning with the first acquisition by purchase of stock included in
the QSP. See section 338(h)(1) for additional special rules.
Specific Instructions
Employer identification number.
An employer identification number (EIN) must be included for each
corporation identified in Section A-1, A-2, B, or C or on attached
schedules. An EIN is not required if the corporation does not have,
and is not otherwise required to have, an EIN.
Country of incorporation.
When identifying the country of incorporation, include political
subdivisions, if any.
Tax year ending.
The tax year ending date of any corporation is determined without
regard to any QSP.
Section A-1. Purchasing Corporation
If more than one member of an affiliated group purchases stock of
the target corporation listed in Section B or identified in an
attached schedule, attach a schedule that lists which target stock was
acquired by each purchasing corporation. Also provide the information
requested on this Form 8023 and instructions for each purchasing
corporation (other than the purchasing corporation listed in Section
A-1).
Section A-2. Common Parent of the Purchasing Corporation
If the purchasing corporation is a member of a consolidated group,
complete Section A-2.
Section C. Selling Shareholders
If Form 8023 is filed for a target corporation that is an S
corporation and a section 338(h)(10) election is made for the target,
the information requested in Section C must be provided for each
shareholder who sells target stock in the QSP. Attach a schedule if
necessary.
Line 4b. Identifying number.
Enter the social security number (SSN) for an individual. Enter the
EIN for a corporation.
Sections E and F. Purchasing Corporation's and Seller's Statements
If a section 338 election is made, the old target is deemed to sell
all of its assets to the new target. Sections E and F concern the
amount and allocation of the purchase price for this deemed sale. Do
not file Form 8594, Asset Acquisition Statement Under
Section 1060, for the deemed sale. Instead, provide the information
requested in this form. The information in Section E is to be provided
by the purchasing corporation. The information in Section F is to be
provided by the selling consolidated group, selling affiliates, or
selling S corporation shareholders. Complete Section F only if a
section 338(h)(10) election is made. Failure to provide any of the
information in Section E or F will not invalidate a section 338
election.
Lines 9 and 11.
Line 9 concerns the determination and allocation of the new
target's adjusted grossed-up basis (AGUB). The AGUB is the amount for
which the new target is deemed to have purchased all of its assets
from the old target. Line 11, to be completed only in the case of a
section 338(h)(10) election, concerns the determination and allocation
of the old target's modified aggregate deemed sale price (MADSP). The
aggregate deemed sale price (ADSP) (if a section 338(h)(10) election
is not made for the target) or MADSP (in the case of a section
338(h)(10) election) is the price at which the old target is deemed to
have sold all of its assets to the new target. The ADSP or MADSP is
allocated among the old target's assets, and the AGUB is allocated
among the new target's assets. This allocation is done under a
residual method that groups the assets into several classes and,
beginning with Class I, allocates an amount to each asset in the class
in proportion to its fair market value. Except in the last class
(Class V), the amount allocated to any asset cannot exceed its fair
market value. See Temporary Regulations section 1.338(b)-2T for
application of the residual method, and Regulations section 1.338-3
for special rules relating to the allocation of ADSP and MADSP.
Recently and nonrecently purchased stock.
Target stock held by the purchasing corporation on the acquisition
date is either recently purchased stock or nonrecently purchased
stock. It is recently purchased stock if it was purchased (within the
meaning of section 338(h)(3)) by the purchasing corporation during the
12-month acquisition period. Otherwise it is nonrecently purchased
stock. Target stock that is not held by the purchasing corporation on
the acquisition date is neither recently nor nonrecently purchased
stock.
AGUB.
In general, the AGUB is the sum of (1) the grossed-up
basis in the purchasing corporation's recently purchased stock,
(2) the purchasing corporation's basis in its nonrecently
purchased stock, and (3) the liabilities of the new target.
In computing the AGUB, the basis of the recently purchased stock is
grossed-up if any target stock is not held by the purchasing
corporation on the acquisition date. The grossed-up basis is the
product of (1) the basis of the recently purchased stock,
times (2) a fraction, the numerator of which is 100%
minus the percentage of the target stock (by value) attributable to
the nonrecently purchased stock and the denominator of which is the
percentage of target stock (by value) attributable to the recently
purchased stock. Special rules apply if there is nonrecently purchased
stock and a section 338(h)(10) election or a gain recognition election
is made. See Regulations section 1.338(b)-1 for rules about AGUB.
MADSP.
MADSP is used if a section 338(h)(10) election is made for the
target. In general, the MADSP is (1) the grossed-up basis
in the purchasing corporation's recently purchased stock, plus
(2) the liabilities of the new target, minus (3)
both the acquisition costs capitalized in the purchasing corporation's
basis in the recently purchased stock and the selling costs of the
selling consolidated group (or selling affiliate or S corporation
shareholders) incurred in connection with the QSP that reduce the
amount realized on the sale of the recently purchased stock. MADSP
generally will be the same as AGUB, except reduced by the acquisition
and selling costs. In computing the MADSP, the basis of the recently
purchased stock is grossed-up if any target stock is not
recently purchased stock (whether or not held by the purchasing
corporation). The grossed-up basis is (1) the basis of the
recently purchased stock, divided by (2) the percentage of
target stock (by value) attributable to the recently purchased stock.
See Regulations sections 1.338(h)(10)-1(f) and 1.338-3 for rules
about MADSP. (In general, ADSP, used if a section 338(h)(10) election
is not made for the target, is computed in the same manner as MADSP
except that, for ADSP, the seller's selling costs are not subtracted.
(See Regulations section 1.338-3 for rules about ADSP.)
Time of computation.
AGUB, ADSP, and MADSP are initially determined at the beginning of
the day after the acquisition date, and are subject to subsequent
adjustments (see Regulations section 1.338(b)-1 and Temporary
Regulations section 1.338(b)-3T). Under the regulations, adjustment
events that occur during the new target's first tax year are taken
into account as if they had occurred at the beginning of the day after
the acquisition date. For purposes of completing this form, you may,
but need not, take into account these first year adjustments.
Line 9a.
Enter the amount of the consideration paid for the recently
purchased target stock. Include only amounts actually paid to the
seller(s) of the target stock. Do not include other amounts that are
also includible in the purchasing corporation's basis in the recently
purchased target stock.
Line 9b.
Enter any other amounts (such as acquisition costs) capitalized in
the purchasing corporation's basis in the recently purchased stock.
Line 9c.
Enter the amount of the new target's liabilities as of the
beginning of the day after the acquisition date, that is, the amount
taken into account to determine AGUB (see Regulations section
1.338(b)-1(f)).
Note:
If a section 338(h)(10) election is not made for the target,
this amount includes the amount of the old target's income tax
liability on the deemed sale, which is separately shown on line
9d.
In order to be included in AGUB at the beginning of the day after
the acquisition date, an obligation must be a bona fide liability of
the target as of that date which is properly includible in basis under
principles of tax law that would apply if the new target had acquired
the old target's assets from an unrelated person and, as part of the
transaction, had assumed or taken property subject to the obligation.
Thus, the amount of an obligation of the target that, as of the
acquisition date, is contingent or speculative is not initially
includible in AGUB.
Line 9d.
Complete this line only if a section 338(h)(10) election is
not made for the target. Enter the amount of the old
target's income tax liability on the deemed sale of its assets. This
amount is also included as part of the amount on line 9c.
Note:
The new target's obligations to pay taxes on the old target's
deemed sale gain increase the overall purchase price and cause this
element of ADSP and AGUB to gross-up or pyramid.
Lines 9f, g, and h.
Enter the amount of AGUB allocated to Class I, II, and III assets,
respectively. Class I assets are cash, and demand deposits and
similar accounts in banks, savings and loan associations, and other
similar depository institutions. Class II assets are
certificates of deposits, U.S. government securities, readily
marketable stock or securities, and foreign currency. Class III
assets are all assets other than Class I, Class II, and section
197 intangibles (whether or not amortizable) (see section 197).
Line 11a.
Enter the amount of the consideration received for the recently
purchased target stock. Include all amounts paid to the seller(s) of
target stock, and do not subtract other amounts (such as selling
costs) that can be subtracted from the purchase price in determining
the seller's (or sellers') amount realized for the recently purchased
target stock.
Line 11c.
Enter the selling costs of the selling consolidated group (or
selling affiliates or S corporation shareholders) incurred in
connection with the QSP that reduce the amount realized on the sale of
the recently purchased stock (e.g., brokerage commissions or any
similar costs incurred by the selling group or shareholders to sell
the target stock).
Lines 11e, f, and g.
Enter the amount of MADSP allocated to Class I, II, and III assets,
respectively. See the instructions for lines 9f, g, and h.
Section G. Elections Under Section 338
Line 14. Gain recognition election.
If a gain recognition election is made for a target corporation, it
applies to each P group member (that is, each corporation that,
on the acquisition date, is a member of the affiliated group that
includes the purchasing corporation and holds nonrecently purchased
stock). See Regulations section 1.338(b)-1(e). If a section 338(h)(10)
election is made for a target, a gain recognition election is deemed
made by each P group member. If a gain recognition election is
actually made (not deemed made) for a target corporation, attach a
schedule providing the target corporation's name and the name,
address, and EIN of each P group member holding nonrecently purchased
target stock. The schedule must also contain the following declaration
(or a substantially similar declaration):
EACH CORPORATION HOLDING STOCK SUBJECT TO THIS GAIN RECOGNITION
ELECTION AGREES TO REPORT ANY GAIN UNDER THE GAIN RECOGNITION ELECTION
IN ITS FEDERAL INCOME TAX RETURN (INCLUDING AN AMENDED RETURN, IF
NECESSARY) FOR THE TAX YEAR IN WHICH THE ACQUISITION DATE OF THE
TARGET OCCURS.
The schedule must be signed on behalf of each P group member
holding nonrecently purchased target stock by a person who states
under penalties of perjury that he or she is authorized to act on
behalf of the corporation.
A gain recognition election for the target also applies to any
target affiliate that has the same acquisition date as the target and
for which a section 338 election is made. Attach a schedule with the
information requested above for each such target affiliate.
Signature
If the common parent of a consolidated group is the agent of the
purchasing corporation under Regulations section 1.1502-77, the
person authorized to sign the statement of section 338 election is the
person authorized to act on behalf of that common parent.
If a QSP of a target corporation is made by two or more
corporations that are members of the same affiliated (but not
consolidated) group, Form 8023 must be signed by a person authorized
to sign on behalf of each corporation.
If a section 338(h)(10) election is made for an S corporation, Form
8023 must be signed by each S corporation shareholder who sells target
stock in the QSP.
Where multiple signatories are required, the signatures, dates,
and titles (if applicable) of all signatories must be provided on a
SIGNATURE ATTACHMENT to the form under the appropriate
declaration under penalties of perjury (this is the statement
that appears on the Form 8023 immediately above the relevant signature
line). Write See attached in the signature area of the Form
8023.
Filing Rules for Foreign Purchasing Corporations
Unless otherwise specifically noted, the general rules and
requirements in these instructions apply to foreign purchasing
corporations.
Who must file.
Generally, the purchasing corporation must file Form 8023. However,
the U.S. shareholders of controlled foreign purchasing corporations
described in Regulations section 1.338-1(g)(3) may make the section
338 election for the corporation. To take advantage of this special
rule, complete Form 8023 and attach a statement to the form showing
the name, address, identifying number, and stock interest of each U.S.
shareholder. The statement must be signed by each U.S. shareholder.
When signing the statement, each U.S. shareholder must state under
penalties of perjury that the stock interest for that shareholder
specified in the statement is correct. Write See attached in
the signature area of Form 8023. As an alternative to a jointly signed
statement, the shareholder signatures may be shown on separate
statements attached to Form 8023. If a U.S. shareholder is not an
individual or does not have delegated authority to sign the statement,
the person signing must state under penalties of perjury that he or
she is authorized to sign the statement for the U.S shareholder.
Copies.
Each U.S. shareholder making the election must attach a copy of
Form 8023 to Form 5471, Information Return of U.S. Persons
With Respect to Certain Foreign Corporations, and file the forms
generally for the foreign purchasing corporation's tax year that
includes the acquisition date; however, failure to do so will not
invalidate a section 338 election.
When and where to file.
Special rules may apply to foreign purchasing corporations or
foreign targets. The time during which a qualifying foreign purchasing
corporation may make a section 338 election for a qualifying foreign
target is described in Regulations section 1.338-1(g)(1)(i).
Foreign purchasing corporations that file a U.S. income tax return
must file Form 8023 with the District Director (Attention: Chief of
Examination) for the Internal Revenue district having jurisdiction
over the purchasing corporation. If the foreign purchasing corporation
does not file a U.S. income tax return, it must file Form 8023 with
the Assistant Commissioner (International) (Attention: Chief of
Examination, CP:IN:D:C:EX:E), 950 L'Enfant Plaza, SW, Washington, DC
20224.
However, if U.S. shareholders of the foreign purchasing corporation
make an election for the foreign purchasing corporation under
Regulations section 1.338-1(g)(3), the Form 8023 must instead be
filed with the District Director (Attention: Chief of Examination) for
the Internal Revenue district having audit jurisdiction over the U.S.
shareholder with the largest ownership percentage in the foreign
purchasing corporation. If there are two or more U.S. shareholders
with equally large ownership percentages, the shareholders may file
the Form 8023 with the District Director (Attention: Chief of
Examination) for the Internal Revenue district having audit
jurisdiction over one of those U.S. shareholders.
Filing Instructions With Respect To Foreign Targets
Unless otherwise specifically noted, the general rules and
requirements in these instructions apply to foreign targets.
A section 338 election will not be valid for a target that is a
controlled foreign corporation, a passive foreign investment company,
or a foreign personal holding company unless affected U.S. persons who
own stock in these targets are notified, in writing, as set forth in
Regulations section 1.338-1(g)(4).
Copies.
In addition to the filing of the original Form 8023 and the
attaching of copies to returns, discussed above, if a section 338
election is made for a foreign target for which a Form 5471 is filed,
attach a copy of Form 8023 to the last Form 5471 for the old target
and first Form 5471 filed by the new target. However, failure to do so
will not invalidate a section 338 election.
Attachments.
Attach a schedule listing the date of each purchase of foreign
target stock, each purchaser's name, the percentage purchased by each
purchaser, and the name and place of incorporation of any selling
entities. If affected U.S. persons owning stock in the target are
notified, attach a schedule containing the name and EIN or SSN of each
U.S. person.
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