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Neither. The proper way to book merger-and-acquisition-related legal fees (along with other non-recurring professional fees related to the transaction) is as p
by rprasad 15y ago
Neither. The proper way to book merger-and-acquisition-related legal fees (along with other non-recurring professional fees related to the transaction) is as part of the basis cost of aquiring the stock. This increased basis cost is not reflected on the seller's side as increased purchase price.
Indeed, this is how legal fees related to the acquisition of any capital asset would be booked by a company. It's all part of the wonder and horror that is the modern tax code.
- jwallaceparker 15y agoWow. Great comment. Agree completely.
- Daniel_Newby 15y agoIndeed. So why do VCs want to stuff the expenses inside the corporation?
- rprasad 15y agoBecause recording an increased basis price means that they need to sell the stock for a higher amount to realize a gain (i.e., a profit). Individual VCs (i.e., angels) would prefer that, b/c it means lower taxable income. However, VC firms prefer the appearance of profitability, so every cost they don't have to take on themselves makes their fund look better.