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Estimated taxes for Sec. 338(h)(10) transactions.

Sec. 338(h)(13) generally provides that, for Sec. 6655 purposes--relating to payment of estimated taxes--the tax attributable to the sale described in Sec. 338(a)(1) (i.e., the asset sale deemed to occur as a result of a Sec. 338 election (including a Sec. 338(h)(10) election)) is not taken into account. Thus, Federal income taxes accruing from the deemed sale of appreciated assets by the "old" target corporation are not taken into account in the quarterly estimated tax calculus.

New Law

AJCA Section 839 amends Sec. 338(h)(13) to provide that it "shall not apply to a qualified stock purchase for which an election is made under [Section 338(h)(10)]."

Effective Date

This amendment applies to transactions occurring after Oct. 22, 2004.


As described in the Conference Report, if a transaction eligible for the election under Sec. 338(h)(10) occurs, estimated tax would be determined based on the stock sale, unless and until the parties agree to make a Sec. 338(h) (10) election, on which estimated tax consequences would be based on the deemed asset sale.

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Author:Simpson, Kirsten
Publication:The Tax Adviser
Date:Jan 1, 2005
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