The purposes of this Article are to examine whether there is any longer a reason for concern because a target corporation can choose selected assets for nonrecognition and to what extent the 1994 regulations properly deal with potentially abusive circumventions of tax goals. Before examining the current status of the consistency requirements, the historical background that led to the adoption of Section 338 and the operation of the section is discussed. The historical background includes: the judicially created Kimbell-Diamond rule, the codification and modification of that rule by the old version of Section 334(b)(2), the operation of the old version of Section 337 that provided nonrecognition for certain liquidating sales of corporate assets, and the replacement of the old version of Section 334(b)(2) by Section 338. The general operation of Section 338 is then sketched, and the special election provided by Section 338(h)(10) is examined. Finally, the consistency rules are examined and critiqued. The circumstance at which the pre-Section 338 rules and Section 338 itself are aimed is the acquisition by a corporation (the "purchasing corporation" or simply "the purchaser") of sufficient shares of stock of a corporation (the "target corporation") to provide control of the target. The tax law's treatment of such purchases of stock has evolved over the years.
Kahn, Douglas A. "Section 338 and Its Foolish Consistency Rules - The Hobgoblin of Little Minds." Quinnipiac L. Rev. 14 (1994): 31-81.