I:10-16 In January of the current year, Park Corporation incurs $34,000 of legal costs associated with a
Question:
I:10-16 In January of the current year, Park Corporation incurs $34,000 of legal costs associated with a patent that was developed internally and has a useful life of 17 years. Park also acquired for cash the net assets of Central Corporation for
$1,000,000. The following assets are specified in the purchase agreement:
Land $ 200,000 Goodwill and going concern value 100,000 Covenant not to compete 50,000 Licenses 125,000 Customer lists 25,000 Inventory 100,000 Equipment and other tangible depreciable business assets 400,000 Total $1,000,000
a. What tax treatment should be accorded the intangible assets?
b. Assuming that you were advising Park Corporation during the negotiations before drafting the purchase agreement, what suggestions would you make regarding the allocation of the total purchase price to the individual assets?
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