The IRS has issued new rulings on the tax treatment of termination fees from broken deals, classifying them as capital gains or losses. This marks a shift from previous rulings where such fees were considered ordinary deductions. The change could impact taxpayers by making it harder to recognize capital losses. The rulings are believed to relate to the terminated AbbVie Inc.-Shire Plc merger with a termination fee over $1.5 billion. The IRS emphasized the nature of the contract as a capital asset. The receipt of a termination fee is considered a capital gain, potentially benefiting individual investors with favorable tax rates.
documents/vol00010-efta01371392-pdf.pdf
{"key_people":["IRS"],"document_type":"other","key_organizations":["AbbVie Inc.","Shire Plc","PitchBook"]}