Transaction costs analysis
For companies involved in a transaction (acquisition, merger, sale, IPO, spin-off, etc.), the related costs can be in the millions of dollars. A Transaction Costs Analysis (TCA) is devoted to analyzing, categorizing, and properly documenting activities and expenses incurred in connection with exploring and entering into corporate transactions for the purpose of recommending the proper federal income tax treatment of such costs.
A TCA study may help companies to properly categorize and document the costs associated with transactions, increase cash flow, establish documentation required to support deductions, and identify deductible or amortizable transaction costs.
E&P / Stock basis
Stock basis and earnings & profits (E&P) can significantly impact dispositions, spin-offs, and mergers and acquisitions; however, most companies do not have the resources to accurately calculate stock basis or E&P.
An E&P study may help you to determine whether a distribution to shareholders will be treated as a dividend, return of capital of capital gain, providing you with the information necessary to make informed decisions such as whether to sell stock vs. assets, whether to structure a transaction as currently taxable or tax deferred, or whether a taxable gain will be realized on a spin-off.
IRC Section 382 limits the amount of taxable income against which net operating loss carryforwards and certain unrealized built-in losses of a loss corporation may be applied following an ownership change. PwC’s 382 team works to determine whether or not your company has undergone an “ownership change” in light of a transaction, triggering the application of Section 382, and if so, the impact of that change on your company’s ability to utilize its losses to offset future income.