Bridge Law LLP

A mid-market company agrees to be acquired.
Everything looks aligned.
Until tax modeling begins.
The buyer wants a 338(h)(10) election for the step-up.
The seller didn’t plan for the ordinary income implications.
Negotiations stall.
Trust erodes.
Value shifts.
Why?
Because structure wasn’t discussed early.
Section 338(h)(10) and 336(e) elections aren’t technical footnotes.
They are negotiation tools.
They influence:
• Allocation of purchase price
• Post-closing liability exposure
• Net after-tax proceeds
• Long-term amortization benefits
Waiting until the purchase agreement stage can cost leverage — or millions.
Early legal strategy isn’t conservative. It’s strategic.
Bridge Law helps clients align tax, legal, and deal objectives before they’re locked into position.
The best time to discuss elections?
Before your term sheet is finalized.

http://bridgelawllp.com/section-338h10-and-section-336e.../

A mid-market company agrees to be acquired.
Everything looks aligned.
Until tax modeling begins.
The buyer wants a 338(h)(10) election for the step-up.
The seller didn’t plan for the ordinary income implications.
Negotiations stall.
Trust erodes.
Value shifts.

Why? Because structure wasn’t discussed early.
Section 338(h)(10) and 336(e) elections aren’t technical footnotes.
They are negotiation tools.
They influence:
• Allocation of purchase price
• Post-closing liability exposure
• Net after-tax proceeds
• Long-term amortization benefits
Waiting until the purchase agreement stage can cost leverage — or millions.

Early legal strategy isn’t conservative. It’s strategic.
Bridge Law helps clients align tax, legal, and deal objectives before they’re locked into position.
The best time to discuss elections?
Before your term sheet is finalized.

http://bridgelawllp.com/section-338h10-and-section-336e.../

Everyone negotiates purchase price. Few negotiate structure.

A founder signs a term sheet for what looks like a strong stock sale.
The buyer assumes they’ll receive a stepped-up asset basis.
The seller assumes capital gains treatment.
But no one discussed Section 338(h)(10).
Or Section 336(e).
And suddenly — the tax outcome doesn’t match expectations.

These elections can fundamentally change how a transaction is taxed.
They can impact after-tax proceeds, asset basis, and future liability exposure.
But here’s what most people don’t realize:
Some elections require joint consent.
Some shift control to one side.
All of them require early planning.

By the time you’re deep in diligence, leverage is limited.
The smartest deals start with structure — not signatures.
Meet and confer with Bridge Law before your next LOI. Not after.

http://bridgelawllp.com/section-338h10-and-section-336e.../

Estate taxes stand to drain your family’s wealth every time one generation passes its assets down to the next. So, can you skip a round of taxes if you skip a generation—for example, grandparents transferring wealth to their grandchildren?

Unfortunately, no. The Generation Skipping Transfer Tax (GSTT) places a lifetime limit on how much can be transferred to persons at least two generations below the transferor before the tax is triggered. However, effective January 1, 2026, the amount of this exemption will be permanently raised to $15 million per individual, to be indexed for inflation after 2026, aligning it with the lifetime gift and estate tax exclusion.

As with that more familiar exclusion, using the GSTT exemption strategically to protect as much wealth from taxation as possible is more complex the more assets you have to shield. But it can be done. At Bridge Law, our Trusts & Estates team understands how to build your estate plan for maximum tax efficiency. To schedule your consultation, contact us today.

📞(714) 525-2400

bridgelawllp.com/the-generation-skipping-transfer-tax-gstt/