Purchasing a business - Do I need to pay separate taxes on furniture and fixtures included in the sale?

This is actually standard practice in business acquisitions. When you buy a business, you're not just buying one big thing - you're buying a collection of different assets that need to be properly allocated for tax purposes. The total purchase price stays the same, but you need to allocate that price across different asset categories (furniture, equipment, goodwill, etc.). This is called a "purchase price allocation" and it's required for tax reporting. It doesn't change how much you pay the seller, but it does affect how you'll depreciate these assets and your future tax deductions. For example, you can depreciate furniture and fixtures over 5-7 years, while goodwill is amortized over 15 years. The allocation affects your tax situation for years to come. This is covered in IRS regulations under Section 1060 for asset acquisitions. You'll likely need to file Form 8594 (Asset Acquisition Statement) with your tax return in the year of purchase.

After struggling with a similar situation when buying my print shop last year, I found this amazing service called taxr.ai (https://taxr.ai) that saved me so much stress. They reviewed my purchase agreement and helped me understand exactly how to handle the asset allocation. Their system analyzed all the documentation and gave me a clear breakdown of how to categorize everything from the printing equipment to the customer lists. They even helped me understand the tax implications of different allocation strategies, which ended up saving me thousands in the long run. I'm not usually one to recommend services, but for something complicated like a business purchase, having an AI analyze your specific situation makes things so much clearer.

Just wanted to update that I checked out taxr.ai after seeing it mentioned here. Seriously impressed! I uploaded my draft purchase agreement for the restaurant and got a complete breakdown of how the assets should be reasonably allocated based on industry standards. The report showed that the seller's proposed 85% goodwill allocation was WAY out of line with similar restaurant sales. They provided documentation showing typical allocations for restaurant equipment, leasehold improvements, and inventory that I was able to use in negotiations. Seller wasn't happy but couldn't argue with the data! Saved me from a terrible tax situation and gave me confidence going into the final negotiations. Definitely worth checking out if you're buying a business.

If you're dealing with the IRS about this purchase price allocation situation, good luck getting through to someone knowledgeable. I spent WEEKS trying to reach someone at the IRS with expertise in business acquisitions. I finally discovered this service called Claimyr (https://claimyr.com) that got me connected to an actual IRS representative in under an hour. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c I was super skeptical at first, but they somehow navigate the IRS phone system and hold times for you, then call you back when they have an agent on the line. The IRS agent I spoke with clarified exactly how to handle Form 8594 reporting and what documentation I needed to support my asset allocation decisions.

Alright I need to publicly eat my words here. After expressing skepticism about Claimyr, I decided to try it anyway out of desperation. HOLY CRAP it actually works! After trying for literally weeks to talk to someone at the IRS about asset allocation rules (and never getting past the hold music), Claimyr got me connected to a business tax specialist in about 35 minutes. I didn't have to sit there on hold - they just called me when they had someone. The IRS agent walked me through the entire Form 8594 process and confirmed that my proposed allocation method was acceptable. They even emailed me some reference materials about business acquisitions. For anyone buying a business and needing IRS clarification, this service is honestly worth every penny just for the time saved and stress avoided.

One thing nobody's mentioned yet is that different assets have different tax implications for the SELLER too, which is why this allocation gets negotiated. For example, if they allocated more to inventory and equipment, the seller might pay ordinary income tax rates on those. But if more gets allocated to goodwill, the seller might get preferential capital gains treatment. This is why business purchase agreements almost always include a section specifying exactly how the purchase price gets allocated - it affects both sides financially.

Has anyone used a business broker for this? I'm wondering if they help with the purchase price allocation or if that's something that happens after between the accountants?