Installment purchase of goodwill

Technical topics regarding tax preparation.
#1
Chay  
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Virginia
If I acquire a business via an installment purchase, how is the portion of the ongoing principal payments allocated to goodwill treated for tax purposes?
 

#2
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The Land
If there’s no contingency involved, and we’re dealing with a straight up/fixed installment sale, you’d book up the entire asset up front, along with the Note Payable. And the principal would just take down the Note.
 

#3
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Dr Assets, Goodwill, non compete etc
Cr Note Payable

The "NOTE" is sort of "unrelated" to the asset after it is booked on day of purchase.
 

#4
Nilodop  
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And the note needs to have interest. But I think you are asking how to deduct the goodwill etc., and the answer, as above implied, is no differently than for a cash purchase.
 

#5
Chay  
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Ok, there was a flaw in my thinking. I was thinking of the principal payments as gradually adding to the basis of various assets, when in fact it's the same situation as if a loan is taken out from a third party and used to acquire all of the assets up front.
 


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