Sec. 338. Certain stock purchases treated as asset acquisitions
 
 (a) General rule
 For purposes of this subtitle, if a purchasing corporation makes
 an election under this section (or is treated under subsection (e)
 as having made such an election), then, in the case of any
 qualified stock purchase, the target corporation -
 (1) shall be treated as having sold all of its assets at the
 close of the acquisition date at fair market value in a single
 transaction, and
 (2) shall be treated as a new corporation which purchased all
 of the assets referred to in paragraph (1) as of the beginning of
 the day after the acquisition date.
 (b) Basis of assets after deemed purchase
 (1) In general
 For purposes of subsection (a), the assets of the target
 corporation shall be treated as purchased for an amount equal to
 the sum of -
 (A) the grossed-up basis of the purchasing corporation's
 recently purchased stock, and
 (B) the basis of the purchasing corporation's nonrecently
 purchased stock.
 (2) Adjustment for liabilities and other relevant items
 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.
 (3) Election to step-up the basis of certain target stock
 (A) In general
 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).
 (B) Determination of basis amount
 For purposes of subparagraph (A), the basis amount determined
 under this subparagraph shall be an amount equal to the
 grossed-up basis determined under subparagraph (A) of paragraph
 (1) multiplied by a fraction -
 (i) the numerator of which is the percentage of stock (by
 value) in the target corporation attributable to the
 purchasing corporation's nonrecently purchased stock, and
 (ii) the denominator of which is 100 percent minus the
 percentage referred to in clause (i).
 (4) Grossed-up basis
 For purposes of paragraph (1), the grossed-up basis shall be an
 amount equal to the basis of the corporation's recently purchased
 stock, multiplied by a fraction -
 (A) the numerator of which is 100 percent, minus the
 percentage of stock (by value) in the target corporation
 attributable to the purchasing corporation's nonrecently
 purchased stock, and
 (B) the denominator of which is the percentage of stock (by
 value) in the target corporation attributable to the purchasing
 corporation's recently purchased stock.
 (5) Allocation among assets
 The amount determined under paragraphs (1) and (2) shall be
 allocated among the assets of the target corporation under
 regulations prescribed by the Secretary.
 (6) Definitions of recently purchased stock and nonrecently
 purchased stock
 For purposes of this subsection -
 (A) Recently purchased stock
 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.
 (B) Nonrecently purchased stock
 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.
 ((c) Repealed. Pub. L. 99-514, title VI, Sec. 631(b)(2), Oct. 22,
 1986, 100 Stat. 2272)
 (d) Purchasing corporation; target corporation; qualified stock
 purchase
 For purposes of this section -
 (1) Purchasing corporation
 The term ''purchasing corporation'' means any corporation which
 makes a qualified stock purchase of stock of another corporation.
 (2) Target corporation
 The term ''target corporation'' means any corporation the stock
 of which is acquired by another corporation in a qualified stock
 purchase.
 (3) 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.
 (e) Deemed election where purchasing corporation acquires asset of
 target corporation
 (1) In general
 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).
 (2) Exceptions
 Paragraph (1) shall not apply with respect to any acquisition
 by the purchasing corporation if -
 (A) such acquisition is pursuant to a sale by the target
 corporation (or the target affiliate) in the ordinary course of
 its trade or business,
 (B) the basis of the property acquired is determined wholly
 by reference to the adjusted basis of such property in the
 hands of the person from whom acquired,
 (C) such acquisition was before September 1, 1982, or
 (D) such acquisition is described in regulations prescribed
 by the Secretary and meets such conditions as such regulations
 may provide.
 (3) Anti-avoidance rule
 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.
 (f) Consistency required for all stock acquisitions from same
 affiliated group
 If a purchasing corporation makes qualified stock purchases with
 respect to the target corporation and 1 or more target affiliates
 during any consistency period, then (except as otherwise provided
 in subsection (e)) -
 (1) any election under this section with respect to the first
 such purchase shall apply to each other such purchase, and
 (2) no election may be made under this section with respect to
 the second or subsequent such purchase if such an election was
 not made with respect to the first such purchase.
 (g) Election
 (1) When made
 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.
 (2) Manner
 An election by the purchasing corporation under this section
 shall be made in such manner as the Secretary shall by
 regulations prescribe.
 (3) Election irrevocable
 An election by a purchasing corporation under this section,
 once made, shall be irrevocable.
 (h) Definitions and special rules
 For purposes of this section -
 (1) 12-month acquisition period
 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).
 (2) Acquisition date
  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.
 (3) Purchase
 (A) In general
 The term ''purchase'' means any acquisition of stock, but
 only if -
 (i) the basis of the stock in the hands of the purchasing
 corporation is not determined (I) in whole or in part by
 reference to the adjusted basis of such stock in the hands of
 the person from whom acquired, or (II) under section 1014(a)
 (relating to property acquired from a decedent),
 (ii) the stock is not acquired in an exchange to which
 section 351, 354, 355, or 356 applies and is not acquired in
 any other transaction described in regulations in which the
 transferor does not recognize the entire amount of the gain
 or loss realized on the transaction, and
 (iii) the stock is not acquired from a person the ownership
 of whose stock would, under section 318(a) (other than
 paragaraph (FOOTNOTE 1) (4) thereof), be attributed to the
 person acquiring such stock.
 (FOOTNOTE 1) So in original.
 (B) Deemed purchase under subsection (a)
 The term ''purchase'' includes any deemed purchase under
 subsection (a)(2). The acquisition date for a corporation which
 is deemed purchased under subsection (a)(2) shall be determined
  under regulations prescribed by the Secretary.
 (C) Certain stock acquisitions from related corporations
 (i) In general
 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)).
 (ii) Certain distributions
 Clause (i) of subparagraph (A) shall not apply to an
 acquisition of stock described in clause (i) of this
 subparagraph if the corporation acquiring such stock -
 (I) made a qualified stock purchase of stock of the
 related corporation, and
 (II) made an election under this section (or is treated
 under subsection (e) as having made such an election) with
 respect to such qualified stock purchase.
 (iii) Related corporation defined
  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.
 (4) Consistency period
 (A) In general
 Except as provided in subparagraph (B), the term
 ''consistency period'' means the period consisting of -
 (i) the 1-year period before the beginning of the 12-month
  acquisition period for the target corporation,
 (ii) such acquisition period (up to and including the
 acquisition date), and
 (iii) the 1-year period beginning on the day after the
 acquisition date.
 (B) Extension where there is plan
 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.
 (5) Affiliated group
 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)).
 (6) Target affiliate
 (A) In general
 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.
 (B) Certain foreign corporations, etc.
 Except as otherwise provided in regulations (and subject to
 such conditions as may be provided in regulations) -
 (i) the term ''target affiliate'' does not include a
 foreign corporation, a DISC, or a corporation to which an
 election under section 936 applies, and
 (ii) stock held by a target affiliate in a foreign
 corporation or a domestic corporation which is a DISC or
 described in section 1248(e) shall be excluded from the
 operation of this section.
 ((7) Repealed. Pub. L. 100-647, title I, Sec. 1006(e)(20), Nov.
 10, 1988, 102 Stat. 3403)
 (8) Acquisitions by affiliated group treated as made by 1
  corporation
 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.
 (9) Target not treated as member of affiliated group
 Except as otherwise provided in paragraph (10) or in
 regulations prescribed under this paragraph, the target
 corporation shall not be treated as a member of an affiliated
 group with respect to the sale described in subsection (a)(1).
 (10) Elective recognition of gain or loss by target corporation,
 together with nonrecognition of gain or loss on stock sold by
 selling consolidated group
 (A) In general
 Under regulations prescribed by the Secretary, an election
 may be made under which if -
 (i) the target corporation was, before the transaction, a
 member of the selling consolidated group, and
 (ii) the target corporation recognizes gain or loss with
 respect to the transaction as if it sold all of its assets in
 a single transaction,
 then the target corporation shall be treated as a member of the
 selling consolidated group with respect to such sale, and (to
 the extent provided in regulations) no gain or loss will be
 recognized on stock sold or exchanged in the transaction by
 members of the selling consolidated group.
 (B) Selling consolidated group
 For purposes of subparagraph (A), the term ''selling
 consolidated group'' means any group of corporations which (for
 the taxable period which includes the transaction) -
 (i) includes the target corporation, and
 (ii) files a consolidated return.
 To the extent provided in regulations, such term also includes
 any affiliated group of corporations which includes the target
 corporation (whether or not such group files a consolidated
 return).
 (C) Information required to be furnished to the Secretary
 Under regulations, where an election is made under
 subparagraph (A), the purchasing corporation and the common
 parent of the selling consolidated group shall, at such times
 and in such manner as may be provided in regulations, furnish
 to the Secretary the following information:
 (i) The amount allocated under subsection (b)(5) to
 goodwill or going concern value.
 (ii) Any modification of the amount described in clause
 (i).
 (iii) Any other information as the Secretary deems
 necessary to carry out the provisions of this paragraph.
 (11) Elective formula for determining fair market value
 For purposes of subsection (a)(1), fair market value may be
 determined on the basis of a formula provided in regulations
 prescribed by the Secretary which takes into account liabilities
 and other relevant items.
 ((12) Repealed. Pub. L. 99-514, title VI, Sec. 631(e)(5), Oct.
 22, 1986, 100 Stat. 2273)
 (13) Tax on deemed sale not taken into account for estimated tax
 purposes
 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).
 (14) Repealed
 (15) Combined deemed sale return
 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)).
 (16) Coordination with foreign tax credit provisions
 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).
 (i) Regulations
 The Secretary shall prescribe such regulations as may be
 necessary or appropriate to carry out the purposes of this section,
 including -
 (1) regulations to ensure that the purpose of this section to
 require consistency of treatment of stock and asset sales and
 purchases may not be circumvented through the use of any
 provision of law or regulations (including the consolidated
 return regulations) and
 (2) regulations providing for the coordination of the
 provisions of this section with the provision of this title
 relating to foreign corporations and their shareholders.