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?
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.
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.
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.