What Happens to IPO Costs When a Co. Later Goes Private?

Tax counsel Scott Rabinowitz and David Schneider and associate Sanessa Griffiths discuss an internal memorandum by the Internal Revenue Service indicating that a corporation may not deduct previously capitalized costs that facilitated an initial public offering, even if the corporation later ceases to be a publicly traded company. Authors highlight how only abandoned IPOs, not completed IPOs that are later taken private, enable loss deductions. Companies in a position to undergo an IPO should recognize that a change in the structure of a corporation is considered to necessarily result in a benefit that lasts until the company is liquidated.