Arkansas Administrative Code
Agency 006 - Department of Finance and Administration
Division 05 - Division of Revenues
Regulation 1997-4 - Comprehensive Individual Income Tax Regulations
Rule 26-51-413 - CORPORATE LIQUIDATIONS
Rule 2.26-51-413 - Corporate Liquidation - Stock Purchase Treated as Asset Acquisition

A taxpayer who has elected to be treated as an S corporation for federal income tax purposes but not for state income tax purposes (therefore retaining its C corporation status), must file a §338 election with the Department's Individual Income Tax Section stating that it desires to be taxed in accordance with IRC Section 338. This is so despite the fact that the taxpayer may already have a §338 election on file with the IRS.

If the taxpayer has elected to be treated as an S corporation for both federal and state income tax purposes, and the taxpayer has also filed a §338 election with the IRS, the taxpayer need not file a separate §338 election with the Department -- the taxpayer will automatically receive §338 treatment by the Department for state income tax purposes as well.

If the taxpayer has elected to be treated as a C corporation for both federal and state income tax purposes, and the taxpayer has also filed a §338 election with the IRS, the taxpayer need not file a separate §338 election with the Department -- the taxpayer will automatically receive §338 treatment by the Department for state income tax purposes as well.

Under IRC Sec. 338, certain stock purchases will be treated as asset acquisitions for purposes of income taxation.