For more information, contact EisnerAmper's Mergers & Acquisitions services team which is a special division of our tax services group.
Mergers and acquisitions are often complex transactions that give rise to many tax issues. Foremost is whether the transaction itself is taxable, tax-free or partially tax-free. Transactions can be structured as asset sales, stock sales or mergers--each bringing about its own challenges and rewards. What often can get overlooked are the ancillary tax implications of the deal: Its impact on attribute carryforwards, transaction costs, golden parachutes and other compensation triggered by the deal. In addition, leveraged acquisitions might impact the deductibility of interest.
Areas that we focus on to provide services to clients as they navigate various tax issues that can arise during a deal include:
Due Diligence Services
Our Large Corporate Tax group provides due diligence services which include buyer (or seller-side) investigations into any unreported federal, state, or international tax liabilities. In addition, we provide advice as to the optimal structuring of acquisitions or dispositions.
For years, the deductibility of success-based investment banking fees has been a source of controversy. How do you allocate it under the “bright line” tests? The IRS has issued Rev. Proc. 2011-29 in which it reversed a previous position and now allows 70% of success-based fees to be deductible without the need for any particular documentation. This applies to tax years ending on or after April 8, 2011.
Questions to consider:
Restrictions on Net Operating Loss and Other Tax Attribute Carryovers
IRC Section 382 places restrictions on the amount of net operating losses and other tax attributes that could be carried over to succeeding tax years. These restrictions can significantly impact the amount and timing of the carryovers. Typically studies are done with respect to the movement of 5% shareholders and these go back to the first day of the first year for which carryovers have originated. When the change occurs the limitation is based upon the value of the loss corporation multiplied by the long-term tax exempt rate.
Some things to consider are: