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Allocation of Purchase Price in a Practice Sale

Allocation of Purchase Price in a Practice Sale

20.00

Contrary to what you may think, negotiations are NOT over once you find a suitable and qualified buyer and then agree on an ask price. The second round of negotiations that follows is about the purchase price allocation. This is because you are required to inform the IRS not only about the sale, but also what classifications you will allocate the assets sold in and the price associated with this for tax purposes.  This gets reported on the IRS Form 8594 and must be filed within 270 days of the sale. What can make this a difficult negotiation is that the seller typically wants to maximize its allocations to those asset classes that are taxed at long term capital gains rates, whereas the buyer  wants price allocations to obtain the greatest deductions with the shortest timeframes. So often times in regard to the typical tax impacts on price allocations “whatever is good for the seller is bad for the buyer and vice versa.  Here is the information about what you need to know when you negotiate the allocation of the purchase price so that it is to your best tax advantage.

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