Jul 07, 2022
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The Tax Code shows that assets fall into Job Function Email List 7 different categories (asset classes) based on IRC section 1060 (Form 8594), and requires that the buyer and Job Function Email List seller adopt and maintain a consistent purchase price allocation method for tax future calculations that will determine both the buyer's basis in the assets Job Function Email List and the seller's gain or loss. In most cases, the tax impact on the individual assets sold are measurably different Job Function Email List for the buyer and seller and therefore the negotiation of the dollar amounts allocated to each of the 7 categories becomes an important element of the business transaction. Minimizing taxes plays a major role Job Function Email List in structuring and negotiating a business transaction. Many promising deals have fallen through because the buyer Job Function Email List and seller couldn't agree on how to structure the deal to minimize taxes. Typically, the seller seeks to have as much money as possible allocated to assets that Job Function Email List would be taxed as capital gains versus assets that would be treated as ordinary income. The buyer on the Job Function Email List other hand strives to have a larger weight allocated Job Function Email List to assets that are currently deductible or where stepped-up assets could be depreciated quickly under IRS regulations. Particular attention should be paid Job Function Email List to the identification and valuation of the "intangible" assets as they can be significant in negotiating terms. While Buyers are often indifferent to an allocation between goodwill and a CNTC, because Sec. 197 allows a buyer to amortize goodwill or a CNTC over the same 15-year period, they will often prefer a larger Job Function Email List allocation to a consulting agreement which is able to be expensed in the year paid. Sellers, however, prefer goodwill & going concern allocations (capital gain treatment) over a CNTC or a Consulting Agreement (ordinary income treatment).