Post-Closing Tax Planning: Elections, Setup, and First-Year Compliance

After acquisition, you still have time to file a Section 338(h)(10) election if the deal qualifies, and establishing correct books and basis records from day one determines tax accuracy for years to come. First-year compliance is more complex than buyers typically expect.

Post-closing elections may still be available. A Section 338(h)(10) election, which treats a stock purchase as an asset acquisition for tax purposes, can be made on Form 8023 by the 15th day of the 9th month after the acquisition. If your deal closed recently and qualifies, this election can create a stepped-up basis that was not part of the original deal terms.

Setting up books correctly from day one matters. How you establish the acquired business's chart of accounts, depreciation schedules, and cost basis records determines the accuracy of every future tax return. Errors in initial setup compound over time.

First-year compliance has extra requirements. Beyond the standard business return, you may need to file Form 8594 (purchase price allocation), short-period returns for the pre-acquisition period, and payroll tax registrations under the new entity.

The pitfall: Many buyers assume the deal is "done" after closing and delay involving a CPA until the first tax return is due. By then, elections have expired, basis records are muddled, and correcting the setup costs far more than getting it right initially.