Tax Policy:

Information on Interest Deducted for Financing Mergers Is Not Available

GGD-88-58: Published: Mar 29, 1988. Publicly Released: Mar 29, 1988.

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Pursuant to a congressional request, GAO examined tax deductions corporations took for interest from funds borrowed to finance mergers which required Federal Trade Commission (FTC) notification.

GAO found that information on interest deductions deriving from corporate mergers is not readily available, since the Internal Revenue Service (IRS), FTC, and the Securities and Exchange Commission (SEC) have no current need to systematically assemble such data. GAO also found that: (1) the number of mergers requiring FTC notification increased substantially, from 996 notifications in fiscal year (FY) 1981, to 2,533 in FY 1987; (2) FTC notification does not require information on corporate-merger financing; (3) IRS requires corporations to identify the total amount of interest expense, but does not require corporations to link interest expenses to the use of borrowed funds; and (4) although SEC collects some information regarding corporate-merger financing, it does not provide an accurate indication of the total amount of interest eligible for deduction for mergers in a given year.

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