Extract to table

Under IRC §1060(a), the consideration paid in an applicable asset acquisition must be allocated among the acquired assets using the "residual method" prescribed by IRC §338(b)(5)

Both the Buyer and the Seller are required to use the residual method to allocate the purchase price, and both are required to report their respective allocations on IRS Form 8594 (Asset Acquisition Statement Under Section 1060), which must be attached to the parties' respective federal income tax returns for the taxable year in which the Transaction closes

As discussed further in Section VIII, both parties must file consistent Forms 8594, and any inconsistency may trigger IRS scrutiny and potential adjustment

Important caveat: The land component of each property must be excluded from the depreciable basis, as land is not depreciable

The notification must include the name and address of the seller, the name and address of the purchaser, the date of the proposed transfer, and the purchase price

263(a)-5(a), a taxpayer must capitalize amounts paid to "facilitate" certain transactions, including the acquisition of assets constituting a trade or business