§1060 — Special allocation rules for certain asset acquisitions
32 cases·3 followed·6 distinguished·2 criticized·2 overruled·19 cited—9% support
Statute Text — 26 U.S.C. §1060
In the case of any applicable asset acquisition, for purposes of determining both—
the transferee’s basis in such assets, and
the gain or loss of the transferor with respect to such acquisition,
the consideration received for such assets shall be allocated among such assets acquired in such acquisition in the same manner as amounts are allocated to assets under section 338(b)(5). If in connection with an applicable asset acquisition, the transferee and transferor agree in writing as to the allocation of any consideration, or as to the fair market value of any of the assets, such agreement shall be binding on both the transferee and transferor unless the Secretary determines that such allocation (or fair market value) is not appropriate.
Under regulations, the transferor and transferee in an applicable asset acquisition shall, at such times and in such manner as may be provided in such regulations, furnish to the Secretary the following information:
The amount of the consideration received for the assets which is allocated to section 197 intangibles.
Any modification of the amount described in paragraph (1).
Any other information with respect to other assets transferred in such acquisition as the Secretary deems necessary to carry out the provisions of this section.
For purposes of this section, the term “applicable asset acquisition” means any transfer (whether directly or indirectly)—
of assets which constitute a trade or business, and
with respect to which the transferee’s basis in such assets is determined wholly by reference to the consideration paid for such assets.
A transfer shall not be treated as failing to be an applicable asset acquisition merely because section 1031 applies to a portion of the assets transferred.
In the case of a distribution of partnership property or a transfer of an interest in a partnership—
the rules of subsection (a) shall apply but only for purposes of determining the value of section 197 intangibles for purposes of applying section 755, and
if section 755 applies, such distribution or transfer (as the case may be) shall be treated as an applicable asset acquisition for purposes of subsection (b).
If—
a person who is a 10-percent owner with respect to any entity transfers an interest in such entity, and
in connection with such transfer, such owner (or a related person) enters into an employment contract, covenant not to compete, royalty or lease agreement, or other agreement with the transferee,
such owner and the transferee shall, at such time and in such manner as the Secretary may prescribe, furnish such information as the Secretary may require.
For purposes of this subsection—
The term “10-percent owner” means, with respect to any entity, any person who holds 10 percent or more (by value) of the interests in such entity immediately before the transfer.
Section 318 shall apply in determining ownership of stock in a corporation. Similar principles shall apply in determining the ownership of interests in any other entity.
For purposes of this subsection, the term “related person” means any person who is related (within the meaning of section 267(b) or 707(b)(1)) to the 10-percent owner.
For provisions relating to penalties for failure to file a return required by this section, see section 6721.
Treasury Regulations
- Treas. Reg. §Treas. Reg. §1.1060-1 Special allocation rules for certain asset acquisitions
- Treas. Reg. §Treas. Reg. §1.1060-1(a) Scope—(1) In general.
- Treas. Reg. §Treas. Reg. §1.1060-1(b) Applicable asset acquisition—(1) In general.
- Treas. Reg. §Treas. Reg. §1.1060-1(c) Allocation of consideration among assets under the residual method—(1) Consideration.
- Treas. Reg. §Treas. Reg. §1.1060-1(d) Examples.
- Treas. Reg. §Treas. Reg. §1.1060-1(e) Reporting requirements—(1) Applicable asset acquisitions—(i) In general.
- Treas. Reg. §Treas. Reg. §1.1060-1(i) §1.1060-1(i)
32 Citing Cases
2011), to support the argument that the Danielson rule is inapposite this case.
Section 1060 provides an example of the integration of basis rules into subchapter K. Section 1060 was enacted in 1986 subsequent to the transaction in question and is inapplicable in this case.13 Nevertheless, the enactment of section 1060 provides an example of the complexity and difficulties involved in a section 1056 integration into partnership transactions.
But we disagree with petitioner that the circumstances do not warrant our bearing against it in estimating the relative values of the transferred assets.
But we disagree with petitioner that the circumstances do not warrant our bearing against it in estimating the relative values of the transferred assets.
Section 1060 prescribes statutory allocation rules to be applied to multiasset sales in computing the seller's gains and losses and the buyer's basis and bears no relevance to petitioner's claimed losses . Section 174(a) and (b) allows a taxpayer, at his election, to either deduct or defer and amortize over a period of not less than 60 months certa
Respondent argues that, the legal fees must be allocated in accordance with the fair-market-value limitations of section 1060, which applies to applicable asset acquisitions . He further argues that all of the legal fees must be allocated under sectio n 1060 to class V intangible assets , which include goodwill and going concern value . He therefore . argues that the legal fees must be amortized; ratably over .15 years beginning with the mont h of purchase under section 197 . Petitioner counters
Section 1060 provides an example of the integration of basis rules into subchapter K. Section 1060 was enacted in 1986 subsequent to the transaction in question and is inapplicable in this case. Nevertheless, the enactment of section 1060 provides an example of the complexity and difficulties involved in a section 1056 integration into partnership
Accordingly, we conclude that the Danielson rule is not applicable in the instant case.8 Does Section 1060 Apply to the Reorganization Agreement?
- 13 - Allocation rules are governed by section 1060, which generally mandates the use of the residual method of purchase price allocation as set forth in section 338(b)(5) and the accompanying regulations.
1060 provides special allocation rules for certain asset acquisitions. Under the residual method described in sec. 1.1060-1T(d), Temporary Income Tax Regs., 53 Fed. Reg. 27040 (July 18, 1988), consideration is first allocated among cash and other items, including both tangible and intangible property (but not intangibles in the nature of goodw
Section 1060 and the Parties' Contentions The parties agree that section 1060 applies to the Walker asset sale. Under section 1060, assets are divided into four classes: Class I (cash and demand deposits), class II (certificates of deposit, Federal securities, readily marketable stock and securities, and foreign currency), class III (includes accou
discrepancy between (1) the purchase price allocation in Broadvox’s and Infotelecom Holdings, LLC’s original 2012 federal tax returns (which did not report all of the Asset Purchase Agreement Payments on Form 8594, Asset Acquisition Statement Under Section 1060) and (2) the reporting in Broadvox’s 2012 financial statements (which reported slightly higher acquired asset values and liabilities assumed than the amounts reported on the tax returns).17 16 The Commissioner further points out that (1)
alue. To summarize: 3 As a technical matter this means that Greenteam ofSan Jose reported $8,813,000 from the transfer ofa class V asset and $22,727,000 from the transfer ofclass VI and VII assets on its Form 8594, Asset Acquisition Statement under Section 1060. Greenteam Facility reported its values similarly on its return. The IRS instructions for Form 8594 tell us what these classes mean. Class V assets are all assets that are not class I through IV assets (cash, actively traded personal prop
alue. To summarize: 3 As a technical matter this means that Greenteam ofSan Jose reported $8,813,000 from the transfer ofa class V asset and $22,727,000 from the transfer ofclass VI and VII assets on its Form 8594, Asset Acquisition Statement under Section 1060. Greenteam Facility reported its values similarly on its return. The IRS instructions for Form 8594 tell us what these classes mean. Class V assets are all assets that are not class I through IV assets (cash, actively traded personal prop
alue. To summarize: 3 As a technical matter this means that Greenteam ofSan Jose reported $8,813,000 from the transfer ofa class V asset and $22,727,000 from the transfer ofclass VI and VII assets on its Form 8594, Asset Acquisition Statement under Section 1060. Greenteam Facility reported its values similarly on its return. The IRS instructions for Form 8594 tell us what these classes mean. Class V assets are all assets that are not class I through IV assets (cash, actively traded personal prop
Included in that list were the following questions: * * a 5.- Who will be doing appraisals/valuations/cost allo- cations of the various assets/properties for pur- poses of doing an IRC Section 1060 allocation?
Petitioners attached Form 8594, Asset Acquisition Statement Under Section 1060, to their tax return.
Petitioners attached Form 8594, Asset Acquisition Statement Under Section 1060, to their tax return.
- 13 - Allocation rules are governed by section 1060, which generally mandates the use of the residual method of purchase price allocation as set forth in section 338(b)(5) and the accompanying regulations.
oung, to complete a valuation of the assets, tangible and intangible, acquired from Old Lorvic, as well as the noncompete and secrecy agreements, respectively. This evaluation was undertaken to meet the purchase price allocation rules delineated in section 1060. With respect to the agreements, petitioner claimed the following amortization expense deductions: - 15 - Noncompete Secrecy Total Taxable Year Agreement Agreement Deductions 1990 $100,000 $50,000 $150,000 1991 400,000 200,000 600,000 199
n 1 year or more.” SPC-fl’s Schedules L for taxable years 1990, 1991, and 1992 reflected that its capital stock was $1,000 and that its paid-in capital was $9,000. Attached to SPC-FL’s 1990 Form 1120S was Form 8594 (Asset Acquisition Statement Under Section 1060). That Form 8594 reports a sale of class III assets by SSI to SPC-FL in exchange for consideration of $1,150,000 on August 8, 1990. Mr. Spencer signed and reviewed SPC-fl’s 1990 Federal income tax return. Amortization Upon acquisition of
Residual Value The parties agree that the residual value method under section 1060 is appropriate in this case.
Additionally, section 1060 sets forth special allocation rules for determining a transferee's basis in certain asset acquisitions.
Residual Value The parties agree that the residual value method under section 1060 is appropriate in this case.
Petitioner attached Form 8594, Asset Acquisition Statement Under Section 1060, to its Federal income tax return, Form 1120, filed for the taxable year 1988.