Deal expenses as tax deductions

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April 26, 2026

by a searcher from Indiana University at Bloomington in Chicago, IL, USA

Appreciate any guidance/best practices on maximizing treatment of (particularly pre-closing) deal expenses as tax deductible. I'm a solo searcher. I read somewhere that it is best to ask legal, QoE, etc. to invoice post-closing, I believe to address "“active trade or business” issues. Any other ways to solve for this - e.g., would it help if I formed my acquisition entity? Opened a bank account? Also open to any accountant recommendations. Thanks!
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Reply by a searcher
from Indiana University (System) in Dallas, TX, USA
You should definitely have your acquisition company open and active for many reasons - even if there are certain deal expenses that aren't deductible for specific reasons, any ordinary and necessary expenses that go toward the accomplishment of the company's mission are deductible. Happy to help however needed...
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Reply by a professional
from University of New Brunswick in Toronto, ON, Canada
Forming a NewCo as your acquisition entity (likely LLC) *before* signing your LOI and running costs through it likely helps. It is best to consult a CPA who has experience with search funds as this has many moving parts to be implemented in the most tax efficient manner.
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