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


Scott H. Rabinowitz David A. Schneider Sanessa S. Griffiths

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.