IRS issues favorable guidance on certain transaction costs

Washington National Tax Services
The IRS Large Business and International Division (LB&I) recently issued a memorandum for all LB&I staff regarding the treatment of eligible milestone payments paid or incurred in the course of certain transactions in which the taxpayer also incurs a ‘success-based fee’ (the directive). The directive states that the treatment of such milestone payments should not be challenged if certain requirements are satisfied. The directive is welcome relief for taxpayers and should greatly simplify the treatment of milestone payments.


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