Corporate Deals, Tax Deductions, and the Wisdom of Solomon
Robert W. Wood1
Robert W. Wood is a tax lawyer (www.WoodLLP.com) who writes widely about taxes. His most popular book is Taxation of Damage Awards & Settlement Payments (4th Ed. 2009 with 2012 Supplement, www.TaxInstitute.com), he can be reached at Wood@WoodLLP.com.
Even in this day of supposedly innovative law firms and creative alternatives to the billable hour, legal fees can add up. Besides, in a reversal that bucks the trend in favor of discount deals, some top legal talent may be able to justify charging more, not less. Charging a premium may be possible with some kinds of specialized transactions that everyone wants to emulate. For example, consider 2014’s race for corporate inversions. As U.S. companies rushed to find foreign merger partners and to get inversion deals closed before either Congress or the White House took action that would restrict the tax benefits of these transactions, law firms could charge a premium for getting the deals done in a hurry.
Whoever provides the legal advice for business acquisitions and dispositions, the price of due diligence, documentation, and structuring work can add up. The most classic way to ameliorate the cost of legal fees is a tax deduction, and the sooner, the better. Yet there are decided limits to being able to deduct legal fees.