Instructions for Form 8883

(Rev. October 2017)

Asset Allocation Statement Under Section 338

Department of the Treasury

Internal Revenue Service

Section references are to the Internal Revenue 

Code unless otherwise noted.

General Instructions

Future Developments

For the latest information about 

developments related to Form 8883 and 

its instructions, such as legislation 

enacted after they were published, go to 

IRS.gov/Form8883.

Purpose of Form

Use Form 8883, Asset Allocation 

Statement Under Section 338, to report 

information about transactions involving 

the deemed sale of corporate assets 

under section 338. This includes 

information previously reported on Form 

8023, Elections Under Section 338 for 

Corporations Making Qualified Stock 

Purchases.

Although you use Form 8023 to make 

an election under section 338, you also 

must file Form 8883 to supply information 

relevant to the election. Timely file Form 

8023 even if you do not have all the 

information required to be supplied 

separately on Form 8883.

If an election is made under section 

338 for a qualified purchase of stock of a 

target corporation, the target corporation 

(old target) is deemed to sell its assets to 

a new corporation (new target) at the 

close of the acquisition date. See 

Regulations section 1.338-1 for details.

There are two types of section 338 

elections. A section 338(g) election is 

made only by the purchasing corporation. 

A section 338(h)(10) election is made 

jointly by both the old target shareholders 

and the purchasing corporation. Form 

8883 must be used to make both types of 

section 338 elections.

Who Must File

For elections under sections 338(g) and 

338(h)(10) both the old target and the new 

target must file Form 8883.

When and How To File

Generally, attach Form 8883 to the return 

on which the effects of the section 338 

deemed sale and purchase of the target's 

assets are required to be reported.

Old target (S corporation for a section 

338(h)(10) election). For a section 

338(h)(10) election for an S corporation 

target, attach Form 8883 to Form 1120S, 

U.S. Income Tax Return for an S 

Corporation.

Old target (consolidated return). If the 

old target is the common parent of a 

consolidated group, attach Form 8883 to 

its final consolidated return ending on the 

acquisition date. If the old target is a 

member (not the parent) of a selling group 

that will file a consolidated return and is 

making a section 338(h)(10) election, 

attach the form to the selling group's 

consolidated return for its tax year 

including the acquisition date.

However, if an election under section 

338(g) is made for the target, attach the 

form to the old target's deemed sale 

return; not to the selling group's 

consolidated return. See Regulations 

section 1.338-10(a)(2) through (4) for 

details.

New target. Attach Form 8883 to the first 

return of the new target. If, on the day after 

the acquisition date, the new target is a 

member of a group filing a consolidated 

return, attach the form to the consolidated 

return that includes the day after the 

acquisition date.

Foreign target. If a section 338(g) 

election is made for a foreign target for 

which Form 5471, Information Return of 

U.S. Persons With Respect to Certain 

Foreign Corporations, must be filed:

The seller (or U.S. shareholder) must 

attach a copy of Form 8883 to the last 

Form 5471 for the old foreign target.

The purchaser (or its U.S. shareholder) 

must attach a copy of Form 8883 to the 

first Form 5471 for the new foreign target.

Supplemental Form 8883

If the amount allocated to any asset is 

increased or decreased after the year in 

which the sale occurs, any affected party 

must complete Parts I through IV and VI of 

Form 8883 and attach the form to the 

income tax return for the year in which the 

increase or decrease is taken into 

account. See the instructions for Part VI 

and Regulations section 1.338-7 for more 

information.

Penalties

If you do not file a correct Form 8883 by 

the due date of your return and you cannot 

show reasonable cause, you may be 

subject to penalties. See sections 6721 

through 6724.

Elections for Multiple Targets 

Under Section 338

Although one Form 8023 (rather than 

multiple Forms 8023) may be used for 

targets that:

Each have the same acquisition date;

Were members of the same affiliated 

group immediately before the acquisition 

date (defined below); and

Are members of the same affiliated 

group (defined below) immediately after 

the acquisition date, file a separate Form 

8883 for each target corporation.

Definitions

A qualified stock purchase (QSP) is the 

purchase of stock of at least 80% of the 

total voting power and value of the stock 

of a corporation by another corporation 

during a 12-month period.

A 12-month acquisition period is the 

12-month period beginning with the first 

acquisition by purchase of stock included 

in the QSP.

The acquisition date is the first date 

on which a QSP has occurred.

Recently purchased target stock is 

any stock in the target corporation that is 

held by the purchasing corporation on the 

acquisition date and was purchased by 

the corporation during the 12-month 

acquisition period. See section 338(h)(1) 

for special rules for stock acquisitions from 

related corporations.

An affiliated group is an affiliated 

group as defined in section 1504(a), 

determined without regard to the 

exceptions contained in section 1504(b).

A corporation will be treated as a 

target affiliate (as defined in section 

338(h)(6)) of the target corporation if each 

corporation was, at any time during much 

of the consistency period that ends on the 

acquisition date of the target corporation, 

a member of an affiliate group which had 

the same common parent. Except as 

otherwise provided, a target affiliate does 

not include a foreign corporation, a DISC, 

or a corporation to which section 936 

applies.

Class I assets are cash and general 

deposit accounts (including savings and 

checking accounts) other than certificates 

of deposit held in banks, savings and loan 

Oct 26, 2017 Cat. No. 33706N
associations, and other depository 

institutions.

Class II assets are actively traded 

personal property within the meaning of 

section 1092(d)(1) and Regulations 

section 1.1092(d)-1 (determined without 

regard to section 1092(d)(3)). In addition, 

Class II assets include certificates of 

deposit and foreign currency even if they 

are not actively traded personal property. 

Class II assets do not include stock of 

target affiliates, whether or not actively 

traded, other than actively traded stock 

described in section 1504(a)(4). Examples 

of Class II assets include U.S. government 

securities and publicly traded stock.

Class III assets are assets that the 

taxpayer marks-to-market at least annually 

for federal income tax purposes and debt 

instruments (including accounts 

receivable). However, Class III assets do 

not include (a) debt instruments issued by 

persons related at the beginning of the 

day following the acquisition date to the 

target under section 267(b) or 707; (b) 

contingent debt instruments subject to 

Regulations sections 1.1275-4, and 

1.483-4, or section 988, unless the 

instrument is subject to the noncontingent 

bond method of Regulations section 

1.1275-4(b) or is described in Regulations 

section 1.988-2(b)(2)(i)(B)(2); and (c) debt 

instruments convertible into the stock of 

the issuer or other property.

Class IV assets are stock in trade of 

the taxpayer or other property of a kind 

that would properly be included in the 

inventory of the taxpayer if on hand at the 

close of the taxable year, or property held 

by the taxpayer primarily for sale to 

customers in the ordinary course of its 

trade or business.

Class V assets are all assets other 

than Class I, II, III, IV, VI, and VII assets.

Note. Furniture and fixtures, buildings, 

land, vehicles, and equipment, which 

constitute all or part of a trade or business 

as defined in Regulations section 

1.1060-1(b)(2) are generally Class V 

assets.

Class VI assets are all section 197 

intangibles (as defined in section 197) 

except goodwill and going concern value. 

Section 197 intangibles include:

Workforce in place;

Business books and records, operating 

systems, or any other information base, 

process, design, pattern, know-how, 

formula, or similar item;

Any customer-based intangible;

Any supplier-based intangible;

Any license, permit, or other right 

granted by a government unit;

Any covenant not to compete entered 

into in connection with the acquisition of 

an interest in a trade or a business; and

Any franchise trademark, or trade name 

(however, see exception below for certain 

professional sports franchises).

The term “section 197 intangible” does 

not include any of the following.

An interest in a corporation, 

partnership, trust, or estate;

Interests under certain financial 

contracts;

Interests in land;

Certain computer software;

Certain separately acquired interests in 

films, sound recordings, video tapes, 

books, or other similar property;

Interests under leases of tangible 

property;

Certain separately acquired rights to 

receive tangible property or services;

Certain separately acquired interests in 

patents or copyrights;

Interests under indebtedness;

Professional sports franchises acquired 

before October 23, 2004; and

Certain transactions costs.

See section 197(e) for further information.

Class VII assets are goodwill and 

going concern value (whether or not the 

goodwill or going concern value qualifies 

as a section 197 intangible).

Specific Instructions

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 

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 consideration paid 

(without regard to selling or acquisition 

costs) for the recently purchased target 

stock (defined earlier). 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 target's liabilities as of 

the beginning of the day after the 

acquisition date. The old target's liabilities 

also are 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). This 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:

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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). This 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 also is 

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 

Classes 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 “2017 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 

Classes 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.

Paperwork Reduction Act Notice. We ask for the information on this form to carry out the Internal Revenue laws of the United 

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figure and collect the right amount of tax.

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displays a valid OMB control number. Books or records relating to a form or its instructions must be retained as long as their contents 

may become material in the administration of any Internal Revenue law. Generally, tax returns and return information are confidential, 

as required by section 6103.

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The time needed to complete and file this form will vary depending on individual circumstances. The estimated burden for business 

taxpayers filing this form is approved under OMB control number 1545-0123 and is included in the estimates shown in the instructions 

for their business income tax return.

If you have comments concerning the accuracy of these time estimates or suggestions for making this form simpler, we would be 

happy to hear from you. You can send us comments through IRS.gov/FormComments. Or write to the Internal Revenue Service, Tax 

Forms and Publications Division, 1111 Constitution Ave. NW, IR-6526, Washington, DC 20224. Do not send Form 8883 to this 

address. Instead, see When and How To File, earlier.

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