When Tax Law, Textualism, Property Law, and M&A Law Converge: AbbVie Inc. v. Commissioner of Internal Revenue
- Author(s):
- Donald J. Kochan
- Posted:
- 04-2026
- Law & Economics #:
- 26-08
- Availability:
- Full text (most recent) on SSRN
ABSTRACT:
This article lies at an intersection of tax law, textualism, property law, and mergers and acquisitions law and policy. A June 2025 U.S. Tax Court decision interpreted International Review Code Section 1234 to determine that “break-up fees”— contractual fees agreed to be paid when certain merger and acquisition deals break down—as “ordinary business expenses.” They could not be capital losses—defined as losses “with respect to property” because the managers were making these commitments and the managers are not owners of the corporation. The decision makes sense – because it respects the text, is consistent with principles of authority and nemo dat non quod habet at the heart of property law, and because it creates a more welcoming treatment of merger-based risks, meaning it encourages merger negotiations something which is socially beneficial. The U.S. Tax Court got it right. And the IRS decision not to pursue an appeal was both wise and beneficial the vitality of the merger market.