What are the benefits to the Seller of Stock Sales with 338(h)(10) Elections?

September 09, 2025

by an investor from Worcester Polytechnic Institute in Atlanta, GA, USA

If anyone has experience with structuring a stock sale with 338(h)(10) Elections, I would appreciate any feedback on the benefit to the Seller. I recognize the benefit to the Buyer, but if the Seller is an LLC taxed as an S-Corp, would they still see the benefit of a stock sale? Thank you

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Reply by a professional
from Harvard University in Lynbrook, NY 11563, USA

You're probably talking about a 336(e) election, but in you're case you may not even need that (or the alternative F reorganization), as you can just have the seller liquidate the S corp for tax purposes by filing a new form 8832 and unchecking the box so it's just a plain LLC. (Nothing happens for corporate legal purposes when you do this.) Either way, however you get the sale to be treated as an asset acquisition, whether or not this will negatively affect the seller is a fact dependent question. If the seller has a lot of depreciated assets or assets purchased within a year that are valuable, then asset sale treatment means the portion of gain resulting from those items will be taxed at ordinary income tax rates rather than capital gains rates (whereas a stock sale will result in it all being treated as capital gains). You really need more info from the seller/about the biz to evaluate. Often in an S corp situation, buyer has a good case that buyer will benefit more from the election/tax structuring, then seller will lose. Happy to discuss. redacted

Reply by an investor
from University of Pennsylvania in Charlotte, NC, USA

Thanks, ^redacted‌ for the mention. Trying to de-complicate this and answer the question (that I think you're asking): if the seller entity is an LLC as you state, then a 338(h)(10) election is not possible. The election only applies to legal S corps (or member of a consolidated group, etc., probably not relevant here.) If you had a different question, please rephrase it and you may get some high-quality responses.

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