What You Need to Know About the New Section 336(e) Regulations

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The tax benefit of acquiring appreciated business assets, instead of stock of a corporation that owns the assets, is well understood. The buyer is entitled to stepped-up cost basis in the assets, not just in stock, providing valuable depreciation or amortization deductions for the buyer over time. The seller can share this benefit by increasing the sale price. But often, despite the tax benefits of an asset sale, only a stock sale is practical. Until recently, stock sales could be treated as asset sales for tax purposes but only in limited situations. In May 2013, new regulations were adopted under section 336(e) of the Internal Revenue Code. These long-awaited regulations will be a significant part of any corporate tax planner’s toolkit. They allow stock sales to be treated as asset sales in many new situations involving both C and S corporations. The regulations also open new possibilities in planning stock redemptions and spin-offs.
This recorded webinar will provide insight into the new section 336(e) regulations, including when they do (and don’t) apply, their effect on sellers and the buyers in stock sales and on corporations and their shareholders in stock redemptions and spin-offs, how to make the section 336(e) election and how to draft agreements so that sellers and buyers get what they bargain for.
The topics that will be covered include:
• Background—section 338(h)(10) and its predecessors 
• Overview of the new section 336(e) regulations 
• Section 336(e) elections in sales of stock to non-corporate buyers and multiple buyers (including sales of S corporation stock) 
• Exclusions of stock sales to related persons and sales of stock involving foreign shareholders and foreign target corporations 
• Multiple stock sales over the 12-month “disposition period” 
• Section 336(e) elections in taxable stock distributions 
• Section 336(e) elections for spin-offs subject to section 355(d) or (e) 
• Issues not resolved in the regulations 
• Election procedures 
• Drafting of agreements

Educational Objectives

• Identify situations in which the new regulations can benefit sellers and buyers of businesses 
• Identify situations in which the new regulations can benefit corporations and their shareholders in liquidations, redemptions and spin-offs 
• Deal with “creeping” sales of stock 
• Determine whether to make a section 336(e) election and how to make it, including a “protective” election 
• Anticipate aspects of prior law that will matter more often under the new regulations 
• Handle issues not resolved in the regulations



Jasper L. Cummings, Jr., J.D., LL.M. is of counsel with Alston & Bird LLP. He has served as chair of the Corporate Tax Committee of the ABA Section of Taxation and Associate Chief Counsel (Corporate). He authors a regular column in Tax Notes entitled What Were They Thinking? He has authored two books on the Supreme Court and federal taxation, published by the ABA in 2010 and 2013. 


Timothy S. Shuman, J.D., is a partner in the Washington, D.C. office of McDermott Will & Emery LLP, where he focuses his practice on corporate and international tax matters for U.S. and foreign multinationals, with particular emphasis on taxable and tax-free acquisitions, dispositions, restructurings and liquidations. He has extensive experience in structuring and providing advice on tax-free reorganizations and spin-offs involving both privately held and publicly traded companies and regularly represents clients in obtaining private letter rulings and other guidance from the IRS.


Robert H. Wellen, J.D., LL.M. is a partner with the Washington, D.C.  law firm of Ivins, Phillips & Barker. He has practiced tax law for more than 35 years with emphasis on planning corporate transactions. His work includes planning M&A, JVs, financings, equity offerings, spin-offs and restructurings of corporate groups; representing clients before IRS and the Treasury Department and in litigation; serving as arbitrator of commercial disputes involving tax issues; and serving as an expert witness. He lectures frequently and has published several articles on tax matters. His outline, “Contingent Consideration and Contingent Liabilities in Acquisitions,” has been published in connection with numerous tax programs.