Can anyone help with Goodwill Amortization in an Asset Sale?

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November 29, 2025

by a searcher from Massachusetts Institute of Technology - MIT Sloan School of Management in Jersey City, NJ, USA

I recently learned about purchase price allocation and I the simple conclusion I reach is that most ETA deals will generate either markedup assets and/or meaningful goodwill since most purchase prices will exceed book value of assets. This in turn leads to meaningful D&A either from the assets or from goodwill. If this is true then I feel like most deals will be able to offset majority of profits with Int Exp and D&A and thus eliminating most tax liability. Am I interpreting the impact of PPA incorrectly? Thanks in advance to the tax savvy searchers out there!
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Reply by a professional
from Liberty University in Fort Myers, Florida, United States
Hey Jose, there’s a bunch to consider around this topic, and I have a few bulleted points below: - it highly depends upon the acquisition structure. If you do an asset sale, then yes the purchase price will get allocated. If you do a stock purchase, you are buying the company’s stock and do not allocate out the purchase price (you can actually do a stock sale and treat it as an asset sale, but both the seller and buyer have to agree and submit a form). - when you allocate out the purchase price, you will put the purchase amount into various buckets. You’ll assign dollars to equipment, inventory, customer lists, etc. anything unallocated essentially goes to Goodwill. - the main thing to consider regarding the (tax) expense recognition is around the useful life of the various assets. If you allocate to equipment, you’ll be able to recognize the expense sooner (spends on the asset and the elections you take). - Goodwill (and most other amortizable assets) get expensed over 15 years. - Since the purchase price is spread over 15 years, it’s likely the company will have taxable income. You may be able to show losses for a year or two by buying fixed assets (with aggressive elections) or other things, but that will run out in a few years (typically). -no matter what, you’ll still have payroll taxes and income taxes on your W2 (assuming set up as a S Corp for taxes) In my firm’s QoE report, we include a projection model which outlines this for our users. You can model out tax obligation and other things as well. I also have an accounting memo I wrote on purchase price allocation I send out to QoE clients when they need it. Happy to connect if you want more details or have any additional questions
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Reply by a searcher
from Massachusetts Institute of Technology in Boston, MA, USA
Considering reasonable ranges of EBIDTA multiples, and leverage on senior debt, one would probably be offsetting about 40-60% of their tax liability with interest and amortization. Depreciation on non goodwill assets will probably be accelerated and impact early years post acquisition. @Josh has provided an excellent response above wrt to the various elements to consider. You can run the numbers directly on any specific scenario you are considering, and ideally one should forecast or at least be able to forecast the cash flow after tax to get a representative picture for post acquisition.
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