Charlie . 1st Feb, 2025 3:33 PM
IRS Sec. 1060 - Definition of Goodwill
The section 1060 method must be used to allocate purchase price when someone is buying a business as opposed to a piece of equipment.
IRS regulations also require use of the section 1060 method in any sale involving assets with goodwill or going concern value.
The section 1060 method requires separating the assets that come with the business into seven asset classes from easiest to hardest to value. Classes I through IV are, in order, cash, things like commodities that are actively traded so that quotes are readily available, accounts receivable and inventory held out for sale. All other tangible assets go into class V. Class VI is intangible assets like power contracts, site leases and licenses. Any remaining purchase price goes into class VII and is considered a payment for customer goodwill or going concern value.
data source: thetaxadvisor.com
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