With the new tax bill expected to become law soon, companies making acquisitions that are asset purchases (or treated as asset acquisitions for tax purposes) will want to pay close attention to the agreed-upon purchase price allocation. Given the ability to effectively expense acquired personal property assets immediately, acquirers could enjoy a significant tax benefit by maximizing the amount of the purchase price that is allocated to non-real property assets. We do also note that a step-up in asset value is often a contentious point for sellers as it can result in more tax to the seller.
What immediate action should be undertaken by acquirers in a taxable asset transaction? The answer is to conduct a high level cost segregation and valuation of personal property assets – prior to the close of the transaction to ensure the allocation of value is included in the purchase agreement - to allocate as much value as possible to non-real property assets.
As anticipated, on Friday evening the ongoing Conference Committee between the House and Senate came to a close, and their final version of the Tax Cuts and Jobs Act was released to the public. Though the Conference adhered heavily to the Senate version of the act because of the Senate’s narrower majority of Republicans, the Conference made significant compromises in a number of key areas in the bill.