Taxes for LLC Search Fund re Investors

February 23, 2021

by a searcher from The University of Texas at Austin - Red McCombs School of Business in 700 Milam St, Houston, TX 77002, USA

Anyone have thoughts at least from a high level on how the search fund should report taxes during a year of searching before finding a deal? Do the investors take advantage of the losses/expenses and lower their basis, then take cap gains if there is a successful acquisition on the difference of the new lower basis and the step-up? .....Or do you just delay until the end of the fund and either take the loss if unsuccessful or cap gains on the step-up if successful?

Thanks for your thoughts in advance!

Reply by a professional
from Walsh College of Accountancy and Business Administration in Detroit, MI, USA

All of your costs incurred before you complete your first acquisition are generally capitalized for tax purposes as section 195 start-up costs or capitalized to the cost of the acquisition under section 263(a).. Gld to jump on a call to discuss in more detail if needed. email me at redacted and we can set up a date and time.

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