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In the middle of purchasing a business and the real estate it operates in, I'm wondering if having the price allocation heavily in favor of the buyer or seller will cause red flags within the IRS? Will they want to see something that is reasonable?
Answer
I’m not sure I have enough information to give a definite answer, but any business acquisition should be reasonable and based on fair market values. If there is an obvious price distortion, that could cause red flags.

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Sarah York, EA

Sarah is a staff writer at Keeper Tax and has her Enrolled Agent license with the IRS. Her work has been featured in Business Insider, Money Under 30, Best Life, GOBankingRates, and Shopify. She has nearly a decade of public accounting experience, and has worked with clients in a wide range of industries, including oil and gas, manufacturing, real estate, wholesale and retail, finance, and ecommerce. Sarah has extensive experience offering strategic tax planning at the state and federal level. During her time in industry, she handled tax returns for C Corps, S corps, partnerships, nonprofits, and sole proprietorships. Sarah is a member of the National Association of Enrolled Agents (NAEA) and maintains her continuing education requirements by completing over 30 hours of tax training every year. In her spare time, she is a devoted cat mom and enjoys hiking, baking, and overwatering her houseplants.

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