How is a 338(h)(10) acquisition best described?

A 338(h)(10) acquisition is best described as a stock deal treated as an asset deal for tax purposes. This hybrid structure allows a buyer to treat a stock purchase as if it were an asset purchase, enabling them to step up the basis of the acquired assets to their fair market value. This effectively allows the buyer to depreciate or amortize these assets, generating potential tax benefits that are typically associated with asset deals.

The strategic advantage of this arrangement is that it combines the simplicity of a stock transaction—where the seller often prefers to sell shares to avoid the complexities of transferring individual assets—with the favorable tax implications of an asset acquisition. By electing to treat the transaction as a 338(h)(10), both buyer and seller can potentially optimize their tax positions, making this structure particularly appealing in certain M&A scenarios.

In contrast, other options do not accurately capture the key characteristics and benefits of a 338(h)(10) acquisition. For instance, an asset deal with no tax benefits or a straightforward stock purchase do not reflect the tax treatment and implications associated with this specific election, while a merger that creates new shares typically pertains to a different type of transaction altogether.