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Impact on M&A in the USA
Two recent announcements regarding revenue procedure and proposed regulation have facilitated the process for establishing a new beginning in the union between the buyer and target. Taxand USA discusses this in more detail.
In the course of negotiating a deal, potential unreserved tax liabilities may be identified by the buyer. Historically, the tax liability would loom over the target until it was eventually resolved or the statute of limitations lapsed. But the IRS has introduced a mechanism, albeit an elective one with limited application, to resolve tax liabilities in the pre-closing period related to changes in accounting methods.
Historically, transaction-related costs that arose in connection with an acquisition were often negotiated between the buyer and seller to determine which party would ultimately receive the benefit of the tax deduction. However, the IRS has attempted to curtail such negotiations by providing more clarity as to which period certain deductions may be taken in.
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