DEBT INSTRUMENTS\u27 TAX TREATMENT IN CORPORATE MERGERS AND ACQUISITIONS

The increase of merger and acquisition(M&A) activity since 1992 has resulted mainly from a domestic economic recovery. The current M&A trend shows that M&A is still an important means of enhancing many corporations\u27 competitive power and of stimulating growth in such areas as computer software and services, wholesale and distribution, miscellaneous services, banking and finance, and leisure and entertainment. Fundraising for mezzanine-fund financing, which reflects investors\u27 foresight about current and future M&A trends, has also seen rapid growth. After the Tax Reform Act of 1986 and the repeal of the General Utilities doctrine, the elimination of the capital gain preference for corporate taxpayers and the recognition of gain by an acquired corporation making an I.R.C. With respect to debt instruments, the use of debt may be limited in the nontaxable reorganization, but not in a taxable transaction. In addition, the deductibility of debt instruments could render taxable mergers and acquisitions framed by debt instruments much more desirable

2016 Trying Times: Important Lessons to Be Learned from Recent Federal Tax Cases

Since 2005, the courts have collectively issued more than 80 opinions involving challenges to deductions claimed under IRC § 170(h) with regard to conservation and facade easement donations. This outline provides a brief history of developments in the deduction context, discusses the practical implications of the recent court decisions, and offers advice on how to file a tax return package to minimize the risk of audit. It also briefly notes various other important issues, such as the IRS\u27s focus on valuation and syndicated deals, quid pro quo, and reserved development rights