Purchase Price Allocation for an Asset Purchase with No Physical Assets

searcher profile

May 02, 2024

by a searcher from University of Minnesota - Twin Cities Campus in Marysville, WA, USA

Hi all! I'm approaching closing for the asset purchase of a business with no physical assets (it's all goodwill and IP) and am working on the purchase price allocation. As far as I can tell, the only three items that should end up on the allocation are goodwill, IP, and the covenant not to compete.

This is my first acquisition, so I'm curious if there's a standard purchase price allocation form or format that I should use, or if I literally just write three bullet points and their respective allocations on a Word doc and have both me and the seller sign it (I imagine something in the middle is most appropriate).

Any guidance you could provide for this first-time searcher would be greatly appreciated!

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commentor profile
Reply by a professional
from Walsh College of Accountancy and Business Administration in Detroit, MI, USA
If these are the only assets being acquired, they all fall into the last class on Form 8594 which combines Class VI and VII. I would not worry about the allocation in the purchase agreement since you are the Buyer. This gives you the latitude to allocate how you want post-close. For tax purposes, all of these assets are amortized over 15 years.
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Reply by a professional
from University of Miami in New York, NY, USA
Happy to help - you need to allocate the purchase price on IRS Form 8594, and while I’d say you should consult with a CPA, as a tax attorney (though not yet your attorney), your assumption that there are very little assets to itemize is incorrect. You have, among others I’m sure, goodwill, IP (broken out and itemized), customer contracts, client lists, office supplies, equipment (computers, phones, etc.), trade secrets not subject to IP, know how, etc.

there may be limited physical assets, but your list of intangibles needs to be more comprehensive. Having done asset purchases for 20 years, I’d be happy to help.

https://calendly.com/petigara-law-group/meeting-with-vishal-petigara
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