Specific Instructions

Table of Contents

Part I. Filer's Identifying Information

Line 1a.   Enter the name as shown on your income tax return.

Line 1b.   Enter the corporation's employer identification number (EIN). If the form is filed by an individual U.S. shareholder for a foreign target, enter the shareholder's social security number (SSN).

Line 1c.   Indicate by checking the applicable box whether you are filing this form because you are filing the federal income tax return that reflects the tax results for the old target of a section 338 election, or because you are filing the federal income tax return that reflects the tax results for the new target of a section 338 election. See When and How To File on page 1 for a discussion of who files the tax returns reporting the section 338 results for the old target and new target, respectively.

Part II. Other Party's Identifying Information

Identify the taxpayer that files the U.S. income tax return, if any, reflecting the tax results under section 338 for the other party to the transaction. If the tax results of the transaction are reported on a consolidated return for the other party, provide the identifying information of the common parent of the consolidated group instead of the old or new target. If the old or new target is a controlled foreign corporation (CFC) and does not file a U.S. income tax return, identify the U.S. shareholder owning the largest interest in the CFC (or if the U.S. shareholder is a member of a consolidated group, the common parent of that group).

Line 2b.    Enter the identifying number (EIN or SSN) of the other party.

Part III. Target Corporation's Identifying Information

Complete Part III if the target identifying information is not provided in Part I (that is, if Form 8883 is filed by the common parent of a consolidated group including the target or by the seller, purchaser, or U.S. shareholder filing for a foreign target).

Line 3b.   An EIN is not required if a party does not have, and is not otherwise required to have, an EIN.

Line 3c.   When identifying the country of incorporation, include political subdivisions, if any.

Part IV. General Information

Both the old and the new target must complete lines 4a through 8g.

Line 5a.   Enter the amount of consideration paid (without regard to selling or acquisition costs) for the recently purchased target stock (defined on page 1). Include only amounts actually paid to the seller(s) of the target stock.

Line 5b.    New Target: Enter the acquisition costs, including any other amounts capitalized in the purchasing corporation's basis in the recently purchased target stock.

   Old Target: Enter the selling costs of the selling consolidated group, selling affiliates, or S corporation shareholder(s) incurred in connection with the QSP that reduce the amount realized on the sale of recently purchased target stock.

Line 5c.   Enter the amount of the target's liabilities as of the beginning of the day after the acquisition date. The old target's liabilities are also measured as of the beginning of the day after the acquisition date. However, see Regulations section 1.338-1(d) regarding certain transactions on the acquisition date. These liabilities may include tax consequences resulting from the deemed sale.

Line 5d.    New Target: Enter the adjusted grossed-up basis (AGUB). AGUB is the amount for which the new target is deemed to have purchased all of its assets from the old target. AGUB is the sum of:

  • The grossed-up basis in the purchasing corporation's recently purchased target stock,

  • The purchasing corporation's basis in nonrecently purchased target stock, and

  • The liabilities of the new target (reported on line 5c).

  See Regulations section 1.338-5 for additional information.

   Old Target: Enter the aggregate deemed sales price (ADSP). The ADSP is the amount for which the old target is deemed to have sold all of its assets in the deemed asset sale. ADSP is the sum of:

  • The grossed-up amount realized on the sale to the purchasing corporation of the purchasing corporation's recently purchased target stock and

  • The liabilities of the old target (reported on line 5c). Compute ADSP as follows:

1. Enter the amount from line 5a (stock price)  
2. Divide the amount on line 1 by the percentage of target stock (by value, determined on the acquisition date) attributable to that recently purchased target stock  
3. Enter the amount from line 5b (selling costs)  
4. Grossed-up amount realized on the sale. Subtract line 3 from line 2  
5. Enter the amount from line 5c (target liabilities)  
6. ADSP. Add line 5 to line 4. Enter here and on line 5d  
For more information see Regulations section 1.338-4.

Part V. Original Statement of Assets Transferred

Allocation of consideration.   An allocation of ADSP must be made to determine the old target's gain or loss on the deemed transfer of each asset, and an allocation of AGUB must be made to determine the new target's basis in each acquired asset. Use the residual method for making the allocation. The amount allocated to an asset, other than a Class VII asset, cannot exceed its fair market value (FMV) on the acquisition date. For purposes of this allocation, FMV is the gross fair market value not reduced by mortgages, liens, pledges, or other debt. The amount allocated to an asset is also subject to any applicable limits under the Internal Revenue Code or general principles of tax law.

  Allocate consideration in Part V as follows:

  1. Reduce the consideration by the amount of Class I assets.

  2. Allocate the remaining consideration to Class II assets, then to Class III, IV, V, and VI assets in that order. For each class, allocate the remaining consideration to the class assets in proportion to their FMVs on the acquisition date (as discussed in the previous paragraph).

  3. Allocate consideration to Class VII assets.

  If an asset can be included in more than one class, choose the lower numbered class (for example, if an asset could be included in Class III or IV, choose Class III).

Line 9.

For a particular class of assets, enter the total FMV of all the assets in the class and the total allocation of the amount on line 5d, (ADSP or AGUB, whichever applies) to the class. For Classes VI and VII, enter the total FMV of Classes VI and VII combined, and the total allocation of the amount on line 5d (ADSP or AGUB, whichever applies) to Classes VI and VII combined.

Part VI. Supplemental Statement of Assets Transferred

Complete Parts I through IV and Part VI and file a new Form 8883 for each year that an increase or decrease in AGUB or ADSP occurs. If an increase or decrease in the amount to be allocated occurs after the purchase date, the increase or decrease must be allocated among the assets. The reallocation is made in the taxable year in which the increase or decrease occurs. Give the reason(s) for the increase or decrease in allocation. Also enter the tax year(s) and the form number of the income tax return with which the original Form 8883 and any supplemental Forms 8883 were filed. For example, enter “2007 Form 1120”.

Increases.    Allocate an increase in consideration by first allocating the increase in consideration to Class I and any remaining consideration to each of the following classes (Class II, III, etc.). The number of classes may vary depending on the year of the acquisition. Increase the amounts previously allocated to the assets in each class in proportion to their fair market values on the purchase date (do not allocate to any asset in excess of fair market value).

  If an asset has been disposed of, depreciated, amortized, or depleted by the new target before the increase occurs, any amount allocated to that asset by the new target must be properly taken into account under principles of tax law applicable when part of the cost of an asset (not previously reflected in its basis) is paid after the asset has been disposed of, depreciated, amortized, or depleted.

Decreases.    Allocate a decrease in consideration as follows:

  1. Reduce the amount previously allocated to Class VII assets.

  2. Reduce the amount previously allocated to Class VI assets, then to Class V, IV, III, and II assets in that order. Within each class, allocate the decrease among the class assets in proportion to their FMVs on the acquisition date (as discussed under Increases above).

You cannot decrease the amount allocated to an asset below zero. If an asset has a basis of zero at the time the decrease is taken into account because it has been disposed of, depreciated, amortized, or depleted by the new target, the decrease in consideration allocable to such asset must be properly taken into account under the principles of tax law applicable when the cost of an asset (previously reflected in basis) is reduced after the asset has been disposed of, depreciated, amortized, or depleted. An asset is considered to have been disposed of to the extent the decrease allocated to it would reduce its basis below zero.

Transitional rules for patents, copyrights, and similar property.   For transactions occurring before January 6, 2000, the regulations applied special rules to the allocation to particular intangible assets of increases or decreases in consideration. See the regulations in effect prior to that time.

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