Supreme Court holds legal and investment banking fees of target of friendly takeover nondeductible

Article Abstract:

The Supreme Court ruled in the 1992 case of Indopco v Commissioner that the investment banking fees paid by a firm during the friendly takeover of another firm are not deductible. This case concerned Unilever U.S. Inc's 1978 acquisition of National Starch and Chemical Corp, now called Indopco Inc. Unilever based its contention that the fees were deductible on the Court's 1971 ruling in Lincoln Savings & Loan Assn v Commissioner. However, Justice Harry Blackmun put forward a narrow view of the 1971 ruling that will inhibit taxpayers from claiming a deduction when no separate asset can be proven.

Prices and rates, Investment banks, Acquisitions and mergers, Tax deductions

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Spin-off of newly formed subsidiary results in recapture of ITC

Article Abstract:

The Tax Court ruled in Salomon, Inc v United States that the IRS can revoke the investment tax credit (ITC) when a parent corporation splits into two corporations through a gradual process accompanied by the transference of property. The Court sided with the IRS in deciding that the incorporation and spin-off Engelhard Minerals and Chemical Corp in 1981 did not meet the criteria for retention of the ITC such as involving property kept as such in the same business.

Corporate divestiture, Divestiture, Investment tax credit

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Tax Court finds anticipatory assignment of income on charitable contribution made "too late" during plan for cash tender offer and downstream merger

Article Abstract:

A 1997 Tax Court decision illustrates the importance of proper tax planning for businesses who claim anticipatory assignment of income related to a charitable contribution. In this instance, a merger agreement was signed several weeks prior to making the gift, this undermining the taxpayers' position. These facts ultimately led to the Court finding the taxpayers liable for deficiencies and penalties.

United States, Taxation, Charitable contributions, Charitable donations

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