Discussion:Qsub election with no 338(h)(10) election
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Revision as of 16:10, 22 June 2009
Discussion Forum Index --> Basic Tax Questions --> Qsub election with no 338(h)(10) election
Discussion Forum Index --> Tax Questions --> Qsub election with no 338(h)(10) election
| 22 June 2009 | |
| In early 2008 an S-corp client (P) purchased 100% stock of another S-corp client (T) of ours. P paid $216,000 to the sole shareholder of T for his shares of stock of T (capital stock on the books of T is $1,000). They did not make the 338(h)(10) election to treat this as a deemed sale of assets. The shareholders of P paid the $216,000 to the shareholder of T. I recorded on P's books a debit to investment in T of $216,000 and a credit to shareholder loans. I am trying to figure out what entry goes on T's books. I will need to eliminate this, of course, in order to do the tax return, but I want to get the books right, and I want to record shareholder basis as well.
When I've dealt with Qsubs in the past, the 338 election was always made, and an entry to goodwill was posted on T's books for the difference between book value of the assets and what was paid. But I'm not sure what to do, if anything, on T's books, with this type of sale - the stock wasn't purchased from the company, so it wouldn't be APIC. Or do I not make an entry on P's books, and consider the $ paid as outside basis on the part of P's shareholders? Would appreciate guidance from anyone who has experience with these types of transactions. I've only seen these a few times, so I'm not well-versed in how all the mechanics of this work (and I have tried to research this first before posting here). Thanks in advance! | |
