Purchase Price Allocation for Commercial Purchases

[Weina Shi]

Dear fellow investors,

If you have done a purchase price allocation, do you do one loan for your purchase with a PPA break down for accounting purposes and real estate tax appeals? Alternative, separate contracts (real estate vs biz assets) would be helpful to save on real estate tax (based assessment) but might create issues for bank financing?

Thanks.

[Henry Clark]

Talk with your cpa

You have to break the discussion down 

A.  Is this an asset purchase, then you can writeoff for taxes

B.  If stock purchase you can’t writeoff for taxes

C.  If your financing you don’t want to do PPA if you end up with goodwill. They probably won’t finance this if your an individual doing a real estate deal

D.  Property taxes. The state your in  will determine the degree you are concerned. Does your state use the purchase price or do they do a independent valuation.  If independent valuation your PPA doesn’t matter  Check with your City or county auditor and find out how valuations are done  

E.  If stock purchase goodwill.  You have to test every year. Talk with your cpa. 

If your an individual generally try not to buy the company, but buy the asset. Even if it is a well known restaurant, buy the assets then buy the name and recipes.