Cost segregation studies — New Tax Court ruling rewards early birds

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Abstract: It may seem premature to conduct a cost segregation study before agreeing to an M&A deal structured at least in part as an asset sale. But it’s important to complete this task as early as feasible, as indicated by a recent U.S. Tax Court decision that effectively prevents either buyers or sellers from modifying purchase price allocations after they’ve been agreed upon. This article discusses the case and explains why, during deal negotiations, buyers and sellers should try to find some common ground that yields mutually beneficial tax consequences.