Purchase Price Allocation

If you are selling a business, there are post-closing valuation opportunities that may help you save on taxes. A Nebraska-based seller who performs business outside of the state may qualify for an exclusion of income depending on the nexus of the assets sold. If your sale transaction included a material amount of intangible value, a purchase price allocation may significantly reduce your Nebraska individual income tax liability.

For acquirers who need to prepare an opening balance sheet, we also perform purchase price allocations for GAAP financial reporting.

What is a Purchase Price Allocation?

When buying a business, you must determine the fair value of all assets and any liabilities assumed. This process is performed by an independent expert. It helps you understand the value of the consideration paid and how to identify and distribute tangible and intangible assets and liabilities accordingly. The residual value is designated as goodwill. Both the buyer and seller in a merger or acquisition transaction must report this allocation on their annual tax returns in the year of sale to comply with IRS and state regulations.

Completing a purchase price allocation can be a complex task. The professionals at Lutz M&A have the expertise necessary to ensure tax compliance and accurate financial reporting.