IRS Takes Tough Stand On Mutually Exclusive Restructuring Transactions Requiring Capitalization Of Investigatory Costs

Abstract

Corporate restructurings come in many flavors, making the decision on which one is most advantageous to a business often increasingly complex. With those many options comes the issue of when the costs for investigating each option are deductible. While Rev. Rul. 73-580 indicated that the costs of investigating a particular reorganization is deductible when it is abandoned, it also held that costs of investigations that are "mutually exclusive" must be rolled up into one and capitalized. A new TAM (TAM 200749013) has tried to answer a question that IRS field attorneys have been grappling with: what are mutually exclusive costs? The answer favors capitalization.