Companies often pay substantial transaction costs when acquiring or selling a business. Fees paid to investment bankers, lawyers, accountants, and consultants to implement a transaction may be deductible for federal income tax purposes depending on the nature and timing of the services. Companies engaged in a merger or acquisition (M&A) can reduce their overall tax liability by performing a transaction cost study aimed at identifying costs that can be immediately deducted or amortized. Even if a company has net operating losses (NOLs), a study may be valuable to avoid a situation where otherwise deductible costs are permanently capitalized and cannot be recovered except in very limited circumstances.

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