Section 338 and the Step Transaction Doctrine

Abstract

Section 338 overrides ordinary step transaction principles for a large but not clearly-defined class of stock purchases. This paper addresses two questions about the scope of the override: whether it applies to a larger set of cases than those in which the acquiring corporation has made a qualified stock purchase, and whether Treasury has authority to adjust the scope of the section 338 override by regulation. The paper concludes that the class of cases is in fact larger than the class of qualified stock purchases but that Treasury does not have the authority under current law to adjust the scope of the override.

Keywords: stock purchase as asset purchase, substance over form, section 338, section 368

JEL Classification: H2, H25