Chart for FAQ 5/23/99 - Growing Your Business Through Acquisitions

Asset Allocation Chart

For an acquisition date on or after February 14, 1997, IRC Sec. 1060 uses a 5-class allocation method. A purchase price is allocated in the following order:

Class I: Dollar-for-dollar to cash and demand deposits;

Class II: Highly liquid assets such as certificates of deposit, U.S. government securities, readily marketable stock or securities, and foreign currency;

Class III: All assets other than Class I, II, IV or V assets. This is a catch-all class which includes inventory, furniture, equipment, other tangible property and intangible property (not listed under IRC Sec. 197).

Class IV: IRC Sec. 197 intangibles, such as workforce in place, information bases, patents, copyrights, licenses and covenants not to compete, except those in the nature of goodwill and going concern value; and

Class V: IRC Sec.197 intangibles in the nature of goodwill and going concern value.