IRS Advice: Stock Option M&A Cash-Outs & Deduction Timing
From Mark Poerio's "ExecutiveLoyalty.org": The IRS has published generic legal advice with respect to stock options and SARs that a target company cashes-out within several days after an acquisition closes (using its own funds or those received from the acquiring company). The IRS advises that "these deductions are governed by the end-of-the-day rule [under Treas. Reg. 1.1502-76(b)(1)(ii)(A)] and are properly reported on Target's short-year return for the taxable year."