IRS matching program for forms 8023 and 8883 may result in invalid Sec. 338 election.

• Author: Smith, Annette B.

The IRS recently launched a program to match the filing of Form 8023, Elections Under Section 338 for Corporations Making Qualified Stock Purchases, by a foreign purchasing corporation acquiring a foreign target, with Form 8883, Asset Allocation Statement Under Section 338, which is filed to report the effect of the Sec. 338 election. The IRS Large Business & International Division (LB&I) is administering this program with the goal of achieving greater transparency in tracking the effect of the Sec. 338 election on the U.S. shareholder or shareholders of the foreign purchasing corporation. While there is no official published guidance from the IRS as of May 2011 regarding this program, the authors' firm represents companies that have been contacted under the program.

If information regarding the U.S. shareholder is missing from a Form 8023 and the IRS is unable to identify the U.S. shareholder that will file the Form 8883, the IRS will contact the purchasing corporation by mail to request the missing information. The IRS may invalidate the Sec. 338 election if it is not provided with the requested U.S. shareholder information. Consequently, a company that receives a Form 8023 letter from the IRS must respond promptly to protect the Sec. 338 election.

Forms 8023 and 8883

A purchasing corporation that has made a qualified stock purchase of a target corporation must file Form 8023 to make an election under either Sec. 338(g) or Sec. 338(h)(10). The form must be filed by the 15th day of the ninth month following the date of acquisition. Form 8023 is filed directly with the Ogden Service Center; it is not filed with either the purchaser's or the target's U.S. tax return, if such a return is filed. Relief for a late-filed Form 8023 may be available under Rev. Proc. 2003-33.

Both the old target and the new target must file Form 8883, which is attached to the income tax return on which the effects of the Sec. 338 deemed sale and purchase of the target's assets are reported. For a foreign target that must be reported on Form 5471, Information Return of U.S. Persons with Respect to Certain Foreign Corporations, filed with the U.S. owner's return, the Form 8883 usually is attached to the Form 5471.

Depending on the date the target is acquired and on the due date (including extensions) of the return to which Form 8883 must be attached, Form 8883 may be filed up to one year after Form 8023 is filed.

Matching Program

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