Internal Revenue Code · 26 U.S.C.
§ 338. Certain stock purchases treated as asset acquisitions
Official text, no changes From the Office of the Law Revision Counsel, release point 119-121 (current through Public Law 119-121 (October 9, 2026)). Compare it with the official text at uscode.house.gov (external site).
Cite as 26 U.S.C. § 338
At a glance
Read from the text, the source credit and the official notes. Not part of the law.
- Status
- In force
- Added
- September 3, 1982 by Pub. L. 97–248
- Last amended
- March 23, 2018 by Pub. L. 115–141
- Amendments
- 8 dated changes in the source credit
- Length
- 9 subsections · 2,658 words · about 12 min to read
- Defines
- 13 terms
- Cross-references
- cites 8; cited by 7 Code sections and 54 other regulations
- Regulations
- 14 issued under this section
The amount described in paragraph (1) shall be adjusted under regulations prescribed by the Secretary for liabilities of the target corporation and other relevant items.
Under regulations prescribed by the Secretary, the basis of the purchasing corporation’s nonrecently purchased stock shall be the basis amount determined under subparagraph (B) of this paragraph if the purchasing corporation makes an election to recognize gain as if such stock were sold on the acquisition date for an amount equal to the basis amount determined under subparagraph (B).
The amount determined under paragraphs (1) and (2) shall be allocated among the assets of the target corporation under regulations prescribed by the Secretary.
The term “recently purchased stock” means any stock in the target corporation which is held by the purchasing corporation on the acquisition date and which was purchased by such corporation during the 12-month acquisition period.
The term “nonrecently purchased stock” means any stock in the target corporation which is held by the purchasing corporation on the acquisition date and which is not recently purchased stock.
The term “purchasing corporation” means any corporation which makes a qualified stock purchase of stock of another corporation.
The term “target corporation” means any corporation the stock of which is acquired by another corporation in a qualified stock purchase.
The term “qualified stock purchase” means any transaction or series of transactions in which stock (meeting the requirements of section 1504(a)(2)) of 1 corporation is acquired by another corporation by purchase during the 12-month acquisition period.
A purchasing corporation shall be treated as having made an election under this section with respect to any target corporation if, at any time during the consistency period, it acquires any asset of the target corporation (or a target affiliate).
Whenever necessary to carry out the purpose of this subsection and subsection (f), the Secretary may treat stock acquisitions which are pursuant to a plan and which meet the requirements of section 1504(a)(2) as qualified stock purchases.
Except as otherwise provided in regulations, an election under this section shall be made not later than the 15th day of the 9th month beginning after the month in which the acquisition date occurs.
An election by the purchasing corporation under this section shall be made in such manner as the Secretary shall by regulations prescribe.
An election by a purchasing corporation under this section, once made, shall be irrevocable.
The term “12-month acquisition period” means the 12-month period beginning with the date of the first acquisition by purchase of stock included in a qualified stock purchase (or, if any of such stock was acquired in an acquisition which is a purchase by reason of subparagraph (C) of paragraph (3), the date on which the acquiring corporation is first considered under section 318(a) (other than paragraph (4) thereof) as owning stock owned by the corporation from which such acquisition was made).
The term “acquisition date” means, with respect to any corporation, the first day on which there is a qualified stock purchase with respect to the stock of such corporation.
Clause (iii) of subparagraph (A) shall not apply to an acquisition of stock from a related corporation if at least 50 percent in value of the stock of such related corporation was acquired by purchase (within the meaning of subparagraphs (A) and (B)).
For purposes of this subparagraph, a corporation is a related corporation if stock owned by such corporation is treated (under section 318(a) other than paragraph (4) thereof) as owned by the corporation acquiring the stock.
The period referred to in subparagraph (A) shall also include any period during which the Secretary determines that there was in effect a plan to make a qualified stock purchase plus 1 or more other qualified stock purchases (or asset acquisitions described in subsection (e)) with respect to the target corporation or any target affiliate.
The term “affiliated group” has the meaning given to such term by section 1504(a) (determined without regard to the exceptions contained in section 1504(b)).
A corporation shall be treated as a target affiliate of the target corporation if each of such corporations was, at any time during so much of the consistency period as ends on the acquisition date of the target corporation, a member of an affiliated group which had the same common parent.
Except as provided in regulations prescribed by the Secretary, stock and asset acquisitions made by members of the same affiliated group shall be treated as made by 1 corporation.
For purposes of section 6655, tax attributable to the sale described in subsection (a)(1) shall not be taken into account. The preceding sentence shall not apply with respect to a qualified stock purchase for which an election is made under paragraph (10).
Under regulations prescribed by the Secretary, a combined deemed sale return may be filed by all target corporations acquired by a purchasing corporation on the same acquisition date if such target corporations were members of the same selling consolidated group (as defined in subparagraph (B) of paragraph (10)).
Except as provided in regulations, this section shall not apply for purposes of determining the source or character of any item for purposes of subpart A of part III of subchapter N of this chapter (relating to foreign tax credit). The preceding sentence shall not apply to any gain to the extent such gain is includible in gross income as a dividend under section 1248 (determined without regard to any deemed sale under this section by a foreign corporation).
(Added Pub. L. 97–248, title II, § 224(a), Sept. 3, 1982, 96 Stat. 485; amended Pub. L. 97–448, title III, § 306(a)(8)(A)(i), Jan. 12, 1983, 96 Stat. 2402; Pub. L. 98–369, div. A, title VII, § 712(k)(1)–(5)(D), (6), (7), July 18, 1984, 98 Stat. 948–952; Pub. L. 99–514, title VI, § 631(b), (e)(5), title XII, § 1275(c)(6), title XVIII, §§ 1804(e)(8)(A), 1899A(7), Oct. 22, 1986, 100 Stat. 2272, 2273, 2599, 2804, 2958; Pub. L. 100–647, title I, §§ 1006(e)(20), 1012(bb)(5)(A), 1018(d)(9), Nov. 10, 1988, 102 Stat. 3403, 3535, 3581; Pub. L. 101–508, title XI, § 11323(c)(1), Nov. 5, 1990, 104 Stat. 1388–465; Pub. L. 108–27, title III, § 302(e)(4)(B)(i), May 28, 2003, 117 Stat. 763; Pub. L. 108–357, title VIII, § 839(a), Oct. 22, 2004, 118 Stat. 1597; Pub. L. 115–141, div. U, title IV, § 401(a)(64), (d)(1)(D)(vii), Mar. 23, 2018, 132 Stat. 1187, 1207.)
Terms defined here
Where the text says “the term … means”. Select a term to jump to its definition.
- 12-month acquisition period § 338(h)(1)
- acquisition date § 338(h)(2)
- affiliated group § 338(h)(5)
- consistency period § 338(h)(4)(A)
- nonrecently purchased stock § 338(b)(6)(B)
- purchase § 338(h)(3)(A)
- purchase § 338(h)(3)(B)
- purchasing corporation § 338(d)(1)
- qualified stock purchase § 338(d)(3)
- recently purchased stock § 338(b)(6)(A)
- selling consolidated group § 338(h)(10)(B)
- target affiliate § 338(h)(6)(B)(i)
- target corporation § 338(d)(2)
Regulations under this section
Treasury regulations (26 CFR) issued under § 338
- § 1.338-0 Outline of topics.
- § 1.338-1 General principles; status of old target and new target.
- § 1.338-2 Nomenclature and definitions; mechanics of the section 338 election.
- § 1.338-3 Qualification for the section 338 election.
- § 1.338-4 Aggregate deemed sale price; various aspects of taxation of the deemed asset sale.
- § 1.338-5 Adjusted grossed-up basis.
- § 1.338-6 Allocation of ADSP and AGUB among target assets.
- § 1.338-7 Allocation of redetermined ADSP and AGUB among target assets.
- § 1.338-8 Asset and stock consistency.
- § 1.338-9 International aspects of section 338.
- § 1.338-10 Filing of returns.
- § 1.338-11 Effect of section 338 election on insurance company targets.
- § 1.338(h)(10)-1 Deemed asset sale and liquidation.
- § 1.338(i)-1 Effective/applicability date.
Cross-references
Computed from the citations in the text of Title 26 and 26 CFR.
This section cites 8 other sections
- § 631(b) Gain or loss in the case of timber, coal, or domestic iron ore
- § 1504(a)(2) Definitions
- § 318(a) Constructive ownership of stock
- § 1014(a) Basis of property acquired from a decedent
- § 351 Transfer to corporation controlled by transferor
- § 1248(e) Gain from certain sales or exchanges of stock in certain foreign corporations
- § 6655 Failure by corporation to pay estimated income tax
- § 302(e)(4) Distributions in redemption of stock
Cited by 7 Code sections
- § 269(b)(1)(B) Acquisitions made to evade or avoid income tax
- § 318(b)(4) Constructive ownership of stock
- § 382(c)(2)(A)(ii) Limitation on net operating loss carryforwards and certain built-in losses following ownership change
- § 901(m)(2)(A) Taxes of foreign countries and of possessions of United States
- § 1060(a)(2) Special allocation rules for certain asset acquisitions
- § 1362(e)(6)(C) Election; revocation; termination
- § 6724(d)(1)(B)(xix) Waiver; definitions and special rules
Cited in 54 regulations not issued under it
- § 1.108(i)-1 Deferred discharge of indebtedness income and deferred original issue discount deductions of C corporations.
- § 1.162-33 Certain employee remuneration in excess of $1,000,000 not deductible for taxable years beginning after December 31, 2017.
- § 1.168(k)-2 Additional first year depreciation deduction for property acquired and placed in service after September 27, 2017.
- § 1.179-4 Definitions.
- § 1.197-0 Table of contents.
- § 1.197-2 Amortization of goodwill and certain other intangibles.
- § 1.245A-5 Limitation of section 245A deduction and section 954(c)(6) exception.
- § 1.245A(e)-1 Special rules for hybrid dividends.
- § 1.336-0 Table of contents.
- § 1.336-1 General principles, nomenclature, and definitions for a section 336(e) election.
- § 1.336-2 Availability, mechanics, and consequences of section 336(e) election.
- § 1.336-4 Adjusted grossed-up basis.
- § 1.355-0 Outline of sections.
- § 1.355-6 Recognition of gain on certain distributions of stock or securities in controlled corporation.
- § 1.367(a)-0 Table of contents.
- § 1.367(a)-8 Gain recognition agreement requirements.
- § 1.368-1 Purpose and scope of exception of reorganization exchanges.
- § 1.381(c)(22)-1 Successor life insurance company.
- § 1.382-5 Section 382 limitation.
- § 1.460-4 Methods of accounting for long-term contracts.
- § 1.585-5 Denial of bad debt reserves for large banks.
- § 1.884-0 Overview of regulation provisions for section 884.
- § 1.884-2T Special rules for termination or incorporation of a U.S. trade or business or liquidation or reorganization of a foreign corporation or its domestic subsidiary (temporary).
- § 1.897-1 Taxation of foreign investment in United States real property interests, definition of terms.
Show 30 more
- § 1.897-5T Corporate distributions (temporary).
- § 1.901-2 Income, war profits, or excess profits tax paid or accrued.
- § 1.901(m)-1 Definitions.
- § 1.901(m)-2 Covered asset acquisitions and relevant foreign assets.
- § 1.901(m)-3 Disqualified tax amount and aggregate basis difference carryover.
- § 1.901(m)-4 Determination of basis difference.
- § 1.901(m)-5 Basis difference taken into account.
- § 1.901(m)-6 Successor rules.
- § 1.901(m)-7 De minimis rules.
- § 1.921-1T Temporary regulations providing transition rules for DISCs and FSCs.
- § 1.951A-3 Qualified business asset investment.
- § 1.1001-3 Modifications of debt instruments.
- § 1.1060-1 Special allocation rules for certain asset acquisitions.
- § 1.1361-0 Table of contents.
- § 1.1361-1 S corporation defined.
- § 1.1361-4 Effect of QSub election.
- § 1.1361-5 Termination of QSub election.
- § 1.1502-13 Intercompany transactions.
- § 1.1502-68 Additional first year depreciation deduction for property acquired and placed in service after September 27, 2017.
- § 1.1502-75 Filing of consolidated returns.
- § 1.1502-76 Taxable year of members of group.
- § 1.1502-77 Agent for the group.
- § 1.1502-93 Consolidated section 382 limitation (or subgroup section 382 limitation).
- § 1.1502-95 Rules on ceasing to be a member of a consolidated group (or loss subgroup).
- § 1.1503(d)-5 Attribution of items and basis adjustments.
- § 1.1502-77B Agent for the group applicable for consolidated return years beginning on or after June 28, 2002, and before April 1, 2015.
- § 1.1561-2 Special rules for allocating reductions of certain section 1561(a) tax-benefit items.
- § 53.4960-1 Scope and definitions.
- § 301.6721-1 Failure to file correct information returns.
- § 301.7701-3 Classification of certain business entities.
Amendment history
From the source credit and the official notes, newest first.
- Amended by Pub. L. 115–141Parts changed in 2018: (h)(3)(A)(iii) (h)(6)(B)(i)
- Amended by Pub. L. 108–357Parts changed in 2004: (h)(13)
- Amended by Pub. L. 108–27Parts changed in 2003: (h)(14)
- Amended by Pub. L. 101–508Parts changed in 1990: (h)(10)(C)
- Amended by Pub. L. 100–647Parts changed in 1988: (e)(3) (h)(7) (h)(16)
- Amended by Pub. L. 99–514Parts changed in 1986: (a)(1) (c) (d)(3) (h)(3)(C)(i) (h)(6)(B)(i) (h)(10)(B) (h)(12)
- Amended by Pub. L. 98–369Parts changed in 1984: (a)(1) (b) (b)(1) (b)(2) (b)(3) (b)(4) (b)(5) (b)(6) (c)(1) (e)(2) (g)(1) (h)(1) (h)(3)(A)(ii) (h)(3)(B) (h)(3)(C) (h)(7) (h)(8) (h)(9) (h)(10) (h)(11) (i)
- Amended by Pub. L. 97–448Parts changed in 1983: (h)(8)
- Added by Pub. L. 97–248
Where it sits in the Code
- Subtitle A Income Taxes
- Chapter 1 NORMAL TAXES AND SURTAXES
- Subchapter C Corporate Distributions and Adjustments
- Part II CORPORATE LIQUIDATIONS
- Subpart B Effects on Corporation
Nearby sections
- § 336 Gain or loss recognized on property distributed in complete liquidation
- § 337 Nonrecognition for property distributed to parent in complete liquidation of subsidiary
- § 338 Certain stock purchases treated as asset acquisitions
Official notes
The Law Revision Counsel's notes for this section (amendments, effective dates and related laws) are long, so they have their own page.