Transaction Cost Review (M&A Benefit)

Mergers and Acquisition costs can be large, diverse and complicated. How they are treated for tax purposes is just as complex. We can help simplify the process and make sure you get it right.

The treatment of expenditures incurred in a business acquisition or disposition is challenging. Some of these costs must be expensed, others capitalized — and there is often a significant amount of “gray area” in between.

The general rule under these regulations is to capitalize all of the costs that facilitate a transaction. In certain covered transactions, costs that are incurred in investigating or otherwise pursuing the transaction are not deemed to be facilitative and can be either immediately deductible or amortizable over 15 years.

New regulations have heightened the documentation requirements regarding the deductibility of certain fees. We employ a comprehensive work plan to analyze the timing and nature of costs incurred in an acquisition or disposition. Our transaction cost analysis deliverable includes:

  1. Analysis of the nature and timing of the expenditures incurred in the transaction categorized by whether they are currently deductible, amortizable, or required to be capitalized under the regulations
  2. Analysis of which tax period and which entity the expenditures incurred in the transaction should appropriately reside
  3. A tax technical memorandum relating to each of the substantive expenditures that were analyzed/categorized

A supporting and cross-referenced documentation binder that includes copies of all material considered as well as analysis leading to the conclusion as to the deductibility or expense of certain costs. This provides you the defense you need if questioned on these controversial items by the IRS.

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Nestled in the heart of the Twin Cities on Lake Bde Maka Ska, ThreeFive has fostered a work environment to attract key talent that is second to none in addressing corporate tax benefit opportunities for its clients.

We'd love to hear from you!

ThreeFive Inc.
3033 Excelsior Blvd., Suite 570
Minneapolis, MN 55416

612.353.6372 office
612.382.3484 after hours