Are search expenses deductible?

searcher profile

July 02, 2022

by a searcher from Saint Louis University in St. Louis, MO, USA

I'm running a part-time, self funded search and have created an LLC to acquire a company. Are there any expenses that I can deduct as a business operating expense before I close the deal? For example, can I deduct due diligence costs, website fees, cell phone bills, etc. to offset my income this year from the w-2 job?


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commentor profile
Reply by a professional
from Walsh College of Accountancy and Business Administration in Detroit, MI, USA
Search expenses are required to be capitalized for tax purposes under sections 195, 709 (partnerships) and/or 248 (corporations). The capitalized costs are then amortized once the acquisition is made because this is when the trade or business begins. Due diligence and deal fee expenses are governed by section 263 and specifically Treas. Reg###-###-#### a)-4 and -5. For the first acquisition, these costs are capitalized and may be depreciated/amortized, depending on the structure of the acquisition.
commentor profile
Reply by a searcher
from Fort Hays State University in Wichita, KS, USA
This question seems to be very "fuzzy" at best. I've consulted with both cpa's and attorneys and received contradictory advice. It is at some point a question about a searchers "risk tolerance". However, I have yet to get a solid answer I felt good about for this topic. I'd love to hear more people's experience (or business structure/process for the search process).
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