A 338 H 10 entity/stock purchase can be highly advantageous for both buyers and sellers in the home care industry. While this transaction qualifies as an entity/stock purchase for legal purposes, it is considered an asset purchase for tax purposes. This provision in the tax code allows for the acquisition of a business’s assets rather than its stock, offering significant benefits to both parties involved.
Advantages for Buyers:
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Step-Up in Basis: Buyers can benefit from a step-up in the tax basis of the assets, allowing for accelerated depreciation. This can lead to substantial tax savings in the future.
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Selective Asset Acquisition: Buyers have the option to choose specific assets to acquire, enabling them to avoid unwanted liabilities or underperforming assets.
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Enhanced Cash Flow: Thanks to the step-up in basis and selective acquisition, buyers may enjoy improved cash flow from the very beginning.
Advantages for Sellers:
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Tax Benefits: Sellers may benefit from capital gains treatment on the sale of assets, which can be more favorable compared to ordinary income tax rates.
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Attracting Buyers: The structure of a 338 H 10 transaction can make a business more appealing to potential buyers seeking tax efficiencies.
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Streamlined Exit Strategy: This method provides sellers with a clear path to exit, simplifying the transfer of ownership and potentially leading to a faster transaction.
Steps for Implementation:
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Consult a Tax Advisor: Engage a professional to understand the full implications of a 338 H 10 transaction for both parties.
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Conduct Due Diligence: Carefully evaluate the assets and liabilities to ensure a beneficial deal structure.
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Prepare for Negotiation: Understand the motivations of both parties to create a win-win scenario.
By taking these steps, both buyers and sellers can maximize their benefits from a 338 H 10 transaction.
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