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Purchase Price Allocations in Real Estate Transactions: Categorizing Assets, Minimizing Tax, Preparing Form 8594

Note: CLE credit is not offered on this program

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Thursday, August 25, 2022

Recorded event now available

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This webinar will discuss the key considerations when categorizing the purchase price of property by asset type. Our panel of income tax experts will review the types of gains, discuss methods for determining the fair market value of assets acquired or sold, and provide examples of purchase price allocations to demonstrate the tax effect of different approaches.

Description

The decisions concerning allocation methods, and amounts allocated to assets purchased or sold, can dramatically affect the tax paid or saved by the seller or buyer. Tax practitioners regularly make these determinations, often after the fact and often with sales agreements lacking detailed asset categories and price allocations. Buyers wanting greater amounts allocated to equipment purchases to take advantage of accelerated depreciation and sellers wanting capital gains treatment for the sale further complicates these decisions.

Section 1060 requires that applicable asset acquisitions use the residual method to allocate the purchase and sales price. Form 8594, Asset Acquisition Statement Under Section 1060, divides assets into seven categories, including cash, personal property, and intangibles. The seventh category is Goodwill. Any dollars remaining after the fair market value of other asset types are placed in categories I-VI, are placed here. Form 8594 is included in the returns of the buyer and seller, and they will not necessarily agree. Partially for this reason, purchase price allocations are frequently challenged by the IRS. Having a reasonable basis and support for allocation methods and amounts is critical.

Listen as our panel of real estate transaction experts explains steps to minimize taxes paid using asset allocations and reasonable methods to withstand IRS scrutiny from the buyer's and seller's perspective.

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Outline

  1. Purchase price allocations
  2. Allocation sources and methods
  3. Types of gain
  4. Buyer-seller negotiations
  5. Categorizing assets
  6. Section 338 election
  7. Preparing Form 8594, Asset Acquisition Statement Under Section 1060
  8. IRS challenges

Benefits

The panel will review these and other critical issues:

  • Categorizing assets under Section 1060
  • Determining the fair market value of assets by category
  • Preparing for IRS challenges to purchase price allocations
  • Preparing For 8594, Asset Acquisition Statement Under Section 1060
  • Taxation of gains by type and recapture

Faculty

Alfonsi, John
John T. Alfonsi, CPA
Managing Director
Cendrowski Corporate Advisors

Mr. Alfonsi has 25 years of tax consulting, business valuation, litigation support and forensic accounting experience....  |  Read More

Johnson, Bruce
Bruce A. Johnson, MBA, CEM
Co-founder and Partner
Capstan Tax Strategies

Mr. Johnson works closely with commercial real estate owners, investors, and accounting firms to provide practical,...  |  Read More

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