Taxpayer Favorable Ruling on M&A Acquisition Costs
"Company requests permission to allocate the transaction costs incurred based on the entity to whom the services were rendered and/or on whose behalf the services were provided. Company’s position is that this treatment is appropriate because these entities directly and proximately benefited from the services and incurred the economic burden of these services. Company essentially argues that the proper party to be charged with costs incurred in the Transaction may not be readily identifiable because of the structure of the transaction and the many parties involved."
"It is well established that where a taxpayer undertakes to pay the obligations of another taxpayer, such payments are not deductible as ordinary or necessary business expenses incurred in the taxpayer’s trade or business. See Interstate Transit Lines v. Commissioner, 319 U.S. 590 (1943); Deputy v. du Pont, 308 U.S. 488 (1940). This is true even where the cost would have been deductible had the taxpayer incurred it. The determination of the appropriate taxpayer is often a question of fact. See Crosby v. United States, 496 F.2d 1384 (5th Cir. 1974)."
"We conclude Company may allocate transaction costs to either Company or Acquisition Co. based upon the entity to which the services were rendered and/or on whose behalf the services were provided."
Full guidance here.
