On March 15, 2018, Blue Corporation purchased 10% of the Gold Corporation stock outstanding. Blue Corporation purchased an additional 40% of the stock in Gold on October 24, 2018, and an additional 25% on April 4, 2019. On July 25, 2019, Blue Corporation purchased the remaining 25% of Gold Corporation stock outstanding.
a.For purposes of the § 338 election, on what date does a qualified stock purchase occur? b.What is the due date for making the § 338 election?
What will be an ideal response?
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| a. | A qualified stock purchase occurs when one corporation acquires in a taxable transaction stock representing at least 80% of the total voting power and at least 80% of the value of another corporation within a 12-month period. For purposes of Blue Corporation, a qualified stock purchase occurs with the July 25, 2019, purchase [90% = 40% (October 24, 2018) + 25% (April 4, 2019) + 25% (July 25, 2019)]. |
| b. | The § 338 election must be made by the fifteenth day of the ninth month beginning after the month in which a qualified stock purchase occurs. Since Blue’s qualified stock purchase date is July 25, 2019, the election must be filed by April 15, 2020. |
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