vehicle valuation

mkpage · ‎December 10, 2023

Hi

I purchased an existing business that included territory, list of established accounts, the goodwill, and a specialty/custom vehicle. I paid x for the whole thing. For my accounts in QB, I need to allot a value for vehicle so I can begin depreciation etc. How would I figure out the value of the truck? I mean I have a guess, but the IRS may want it based on something more concrete. A "blue book" is not the best source as the vehicle is modified into a food truck.

Rainflurry · ‎December 10, 2023

@mkpage

Hopefully, your lawyer and accountant set it all up and the sellers had their own lawyer and accountant. I've seen business sales where both parties use a "neutral attorney" and that's not a good idea. The purchase agreement (PA) and associated schedules should have values allocated to each individual asset so they can be assigned to their respective classes (vehicles are a Class V asset). You don't have a breakdown like that? If not, how did the accountant determine the total value of Class V assets to report on Form 8594? The seller has depreciated the vehicle (along with all of the other assets they sold) so they need to have an exact selling price to calculate their gain/loss. I have bought and sold six businesses (all asset sales) and the purchase agreements have always had a breakdown of every individual asset. For example:

If there is no way to determine the value based on the PA, all you can go by is FMV. Since this is a specialty/custom vehicle, FMV may not be easy to determine. I would ask your CPA how to do that. If the value is significant, and you have no specific selling price that was negotiated with the seller, then you may need an appraisal. Just my $.02.

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Rainflurry · ‎December 10, 2023

@mkpage

The value of all the assets purchased should have been negotiated as part of the sale because the seller needs to use the same value to determine their loss/gain on the sale of the assets. The IRS requires the buyer and seller to report the value of all assets purchased and sold on Form 8594. Form 8594 requires you to report the seller's information and they need to report yours so they can match the asset values. Not sure what to tell you at this point other than to get with the seller to work it out. I'm guessing you didn't use an attorney or business broker to handle the sale?

mkpage · ‎December 10, 2023

Thanks, A lawyer and accountant set it all up. We did use that form. The form didn't however breakdown the total sale into pieces, x for the truck, y for the business, z for good will etc. In QB's I should be able to take that total business purchase and break it out into its parts though. The vehicle being the one thing of most interest so I can begin the depreciation process, but I'd need a starting value. I can use my opinion of it of course but was seeking if someone had a similar situation.

Rainflurry · ‎December 10, 2023

@mkpage

Hopefully, your lawyer and accountant set it all up and the sellers had their own lawyer and accountant. I've seen business sales where both parties use a "neutral attorney" and that's not a good idea. The purchase agreement (PA) and associated schedules should have values allocated to each individual asset so they can be assigned to their respective classes (vehicles are a Class V asset). You don't have a breakdown like that? If not, how did the accountant determine the total value of Class V assets to report on Form 8594? The seller has depreciated the vehicle (along with all of the other assets they sold) so they need to have an exact selling price to calculate their gain/loss. I have bought and sold six businesses (all asset sales) and the purchase agreements have always had a breakdown of every individual asset. For example:

If there is no way to determine the value based on the PA, all you can go by is FMV. Since this is a specialty/custom vehicle, FMV may not be easy to determine. I would ask your CPA how to do that. If the value is significant, and you have no specific selling price that was negotiated with the seller, then you may need an appraisal. Just my $.02.

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