New IRS Procedure Facilitates Deduction of Success-based Fees in Mergers and Acquisitions

April 21, 2011
In a new Revenue Procedure, the U.S. Internal Revenue Service has created a “safe harbor” election that will allow taxpayers to deduct 70 percent of bankers’ fees and other deal-related expenses that are contingent on the closing of a business acquisition without obtaining documentation as to what types of services the bankers or other service providers performed or when. This update clarifies the recent election, which is favorable to taxpayers as the required documentation usually results in deductions of less than 70 percent of fees.