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Purchase Price Allocation
My partner and I are in the process of purchasing a billiard hall and were asked to provide the purchase price allocation. This is a struggling business which we are hoping to revive. How should we allocate the purchase price?
Also, please confirm if my understanding is correct with regard to “Tangible Personal Property”: Suppose I have a five year lease and the purchase price is $100,000. If I allocate $90,000 to “Tangible Personal Property,” I could recover more of the purchase price via depreciation in five years versus allocating, say, $50,000. The drawback is I would have to pay higher unsecured property tax since the unsecured property tax would be assessed on $90,000 as opposed to $50,000. If I allocate more to “Goodwill” and less to “Tangible Personal Property,” I would pay less in unsecured property tax, but recovery of my purchase price would take longer since “Goodwill” is amortized over a fifteen year period. Does that make sense? |
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