Tax Treatment of Buy-Side Transaction Expenses in Health Care M&A Deals

• May 14, 2025

• Kevin Erb , Husch Blackwell LLP

Every tax advisor who has represented a buyer in a merger or acquisition knows that transaction expenses can often be substantial. Examples include broker commissions, legal and accounting fees, consulting or advisory fees, the costs of obtaining regulatory approvals, representation and warranty insurance, due diligence fees, market studies, and transaction bonuses for key employees. Buy-side transaction expenses are generally either deducted under Internal Revenue Code Sec. 162, capitalized under Sec. 263, or amortized under Sec. 195. While the tax treatment of many transaction expenses is clear, determining the tax treatment of certain expenses will require a close analysis of the applicable contract and the nature and timing of services performed. This article provides an overview of applicable law, discusses how such law applies to common buy-side transaction expenses, and considers certain expenses that may not fit neatly into either Sec. 263 or Sec. 195.  

ARTICLE TAGS

• Tax and Finance Practice Group
• Health Care Finance and Transactions
• Tax and Nonprofit