Mergers & Acquisitions

Resources: Glossary

Don’t be confused or intimidated by any terms or abbreviations in the M&A world. You’ll find answers here.

Allocation of Purchase Price

Definition

The allocation of the purchase price of a business among various classes of assets, such as inventory, goodwill, land, buildings, etc., for tax purposes.

See Also

Adjusted basis, goodwill.

Tips

The allocation impacts both the seller’s and the buyer’s tax consequences and is often heavily negotiated between the parties. IRS Form 8594 (Asset Acquisition Statement) must be filed with the IRS at the end of the tax year for the purchase or sale of a business. There are technically seven categories of assets in IRS Form 8594.

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