M&A / Transaction Tax Structuring
Service description
M&A tax structuring shapes how a business sale or purchase is taxed for both sides before signing — choosing between a stock deal and an asset deal (or a stock deal treated as an asset deal under an IRC §338 election), allocating the purchase price among the assets, and deciding which tax attributes, elections, and carryovers survive the transaction. The structure chosen changes who pays tax, how much, and when, so it is negotiated as part of the deal itself rather than decided afterward.
Common industries
Any business, in any industry, that is buying or selling a company or its assets.
ROI
The right structure can shift real value between buyer and seller; getting it wrong is expensive and hard to undo, so it's high-leverage at deal time.
Benefit
Structure a purchase or sale to minimize tax for both sides — asset vs. stock, elections, rollovers — before the deal is signed.
Why get it
The tax cost of a deal can differ enormously depending on how it's structured — stock versus assets, the elections made, and how the price is allocated — and those choices are locked in once the deal closes, with little room to redo them afterward.
When you benefit
A one-time engagement tied to a specific transaction, done in the weeks or months of negotiation before signing and closing.
What it costs
Typically a flat or capped fee scoped to the deal's size and structure, sometimes with an hourly component for open-ended negotiation.
When you pay
Usually billed in phases tied to the deal timeline — structuring analysis during negotiation, then documentation support through signing and closing — or as one fee due at closing. A retainer is common given the deal's time pressure.
Other costs
Legal fees to draft the purchase agreement and any elections are separate from the tax structuring fee, as is any valuation work needed to support the purchase-price allocation.
Risks to know
Choosing the wrong structure, or missing an election deadline such as the §338(h)(10) election window, can permanently lock in a worse tax result for one or both sides. A purchase-price allocation that isn't supported, or that the buyer and seller report inconsistently, invites IRS scrutiny of both returns.
When risks arise
Structural decisions and elections are made at signing or shortly after closing and, once made, are generally irrevocable — so the highest-stakes window is the negotiation period itself, not anything that happens later. A mismatched purchase-price allocation typically surfaces only when the IRS compares both parties' returns, which can be years after closing.
The process
The advisor models the tax outcome of the available structures for both sides, recommends elections such as a §338(h)(10) election where they help, and negotiates the purchase-price allocation with the counterparty's advisor. It drafts the election forms and allocation schedule, and coordinates with legal counsel so the purchase agreement matches the agreed structure. After closing, it confirms the elections and allocation are reflected consistently on both parties' returns.
Your commitment
The business shares the deal terms as negotiated, its cap table or asset list, prior tax returns, and any available tax attributes such as net operating losses. Both sides need to agree early on the structure and the purchase-price allocation, since the buyer and seller must report the deal consistently.
Documents to gather
- Letter of intent or term sheet for the transaction
- Cap table (for a stock deal) or asset and liability list (for an asset deal)
- Prior three years' tax returns for the target company
- Schedule of tax attributes — net operating losses, credits, or basis — that could carry over
Helpful reading
- Tax compliance after M&As — Journal of Accountancy
- Income tax purchase accounting considerations for a stock acquisition — The Tax Adviser
Further research
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