Whyteglov Services: IRC Section 1060 Asset Acquisition

Abstract

An asset acquisition allows the buyer to choose specific assets that will be purchased and liabilities that will be assumed, thereby reducing risk of unwanted obligations. This case study draws students’ attention to a critical issue in asset acquisitions under the U.S. federal tax system — the purchase price allocation process specified in IRC 1060. Students are presented with a realistic situation involving the sale of a technology company’s analytics division. To solve the case, students must leverage their understanding of depreciation, amortization, and purchase price allocation rules to assess the competing incentives of the buyer and seller and present the allocations preferred by each party. Students must also perform analyses to determine whether a business case exists for the buyer to assume certain loss-generating contracts from the seller. This case develops students’ critical thinking in interdisciplinary areas (tax, financial accounting, finance, and managerial accounting) and cultivates students’ ability to provide professional tax-planning advice.