Optimizing Tax Treatment Of Transaction Costs

Webinar: ID# 1014604
Recorded CD
About This Course:
Whenever a company undertakes a capital transaction, the related transaction costs associated with investigating and pursuing the transaction are presumed nondeductible.

However, there are opportunities to deduct certain transaction costs, depending on the type of cost incurred and the scope and timing of services associated with the transaction costs.

When a company evaluates a corporate transaction (e.g., merger; stock or asset acquisition; or LBO), the amount of transaction costs may be significant, which can have a meaningful impact on the corporate tax return.

Additionally, due to the financial statement treatment of these costs, these amounts are generally considered permanent items. As such, it is important for corporate tax departments to carefully review and evaluate transaction costs so that the maximum amount of transaction costs are deducted.

This live webinar will review strategies to optimize the deduction of transaction costs and also provide practical tips regarding how to evaluate which deductions may be available and/or whether amortization or other recovery of certain transaction costs may be available.

Additionally, the program will review recent developments from the IRS including published guidance as well as controversy trends.

We look forward to your participation and involvement in what should be an interesting program.


Background and Overview of the Treatment of Transaction Costs
  • History and Development of the Treatment of Transaction Costs
  • Transaction Costs Are Generally Non-Deductible but Certain Exceptions Are Available for Costs (e.g., Investigatory and Other Deductible Costs
  • IRS Published Safe Harbor Election Under Rev. Proc. 2011-29, Which Simplifies the Treatment of These Costs
Controversy Trends
  • Although the Safe Harbor Election Has Reduced IRS Disputes, Controversy in IRS Exam/Appeals Continues
  • Substantiation Challenges
  • Questions Regarding Which Entity May Take Expenses Into Account
  • Treatment of Milestone Payments Creditable Against Success-Based Fees
  • Examination of Termination Payments/Management Fees
  • Consolidated Return Questions – Whether End-Of-the Day and Next-Day Rules Affect Which Entity Accounts for Expenses and Whether They Are Start-up Costs
Resolution of Treatment of Transaction Costs
  • Financial Statement and FIN 48 Considerations; Level of Confidence/Opinion Coverage
  • Letter Rulings, Pre-Filing Agreements, CAP Determinations
About The Presenters

Ellen McElroy
  • Partner with Pepper Hamilton LLP
  • Focuses on a broad variety of corporate tax issues, primarily accounting method considerations
  • Regularly advises clients on the proper tax treatment of costs associated with tangible property, (including the treatment of repair costs), intangible property (including acquisition costs and recovery), and corporate transaction costs
  • With respect to corporate transaction costs, she advises clients regarding various corporate transactions, including both acquisitive and divisive transactions, both strategic and private equity transactions
  • Regularly represents clients before IRS, including representation at the IRS National Office with private letter rulings and technical advice
  • Represented a number of clients in controversy matters, including IRS exam, appeals, including matters involving pre-filing agreements, fast track appeals, and the Compliance Audit Program (CAP)
  • Before joining Pepper, Ms. McElroy was a partner with Ernst & Young LLP, where she led the firm’s transaction cost review practice and worked on accounting methods and inventory matters for Fortune 500 companies as part of her role in the firm’s National Tax Department
  • Prior to Ernst & Young LLP, Ms. McElroy was legislation counsel for the IRS Office of Special Counsel (Legislation), where she developed and drafted legislative proposals, supervised congressional investigations and GAO audits involving IRS
  • Past chair of the ABA Tax Accounting Committee, served as chair of the Tax Accounting Committee’s Capitalization Sub Committee, served as the tax accounting chair for the 2013 Federal Bar Association’s Section on Taxation Tax Law Conference
  • Adjunct professor at Georgetown University Law Center
  • LL.M. degree, Georgetown University Law Center; J.D. degree, University of Denver College of Law; B.B.A. degree, Emory University
Optimizing Tax Treatment Of Transaction Costs
Available on CD format
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