If tax reform provides the ability to immediately expense capital expenditures, there could be a profound effect on M&A structuring, potentially changing the dynamic of deal prices as part of a 338(h)(10) election or asset purchase, given the desire to maximize the value of the fixed assets.
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Currently, the cost of capital expenditures may only be recovered for tax purposes over extended periods of time. But many Republicans, including the President, believe that immediate and full deductions for capital expenditures can stimulate the economy by lowering the cost of capital for expansion, thereby encouraging new job-creating investments.
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