Section 1060
Section 1060 is the Internal Revenue Code provision governing how a purchase price is allocated in an applicable asset acquisition. It requires the residual method, which assigns consideration to asset classes in a defined order, with goodwill absorbing what remains.
Why Section 1060 Matters in a Laundromat Sale
Section 1060 is the framework Form 8594 reports under. The residual method means cash and near-cash items are valued first, then tangible property such as laundry equipment at fair market value, then intangibles, with goodwill and going-concern value taking the remainder. Allocations that ignore the ordering — assigning an arbitrary figure to equipment because it produces a preferred tax result — are the ones that draw scrutiny.
Example
After allocating to cash equivalents and tangible personal property at fair value, and to a separately valued non-compete, $138,000 of a $420,000 price remains. That residual is goodwill and going-concern value, reported as Class VII.
What to Check
- Follow the residual method ordering rather than assigning a preferred number to equipment.
- Support the equipment fair-value figure with something defensible.
- Coordinate the allocation with your CPA before signing the LOI.
Where This Comes Up
- Form 8594 and Laundromat Purchase Price Allocation
- Purchase Price Allocation in a Laundromat Sale: Where the Money Gets Assigned
- Goodwill
- Laundromat Valuation: How Stores Are Priced and Why
Related Terms
- Form 8594 — Form 8594 is the IRS Asset Acquisition Statement that buyer and seller each file when a group of assets constituting a trade or business is transferred and g...
- Goodwill — Goodwill is the value of a business beyond the fair market value of its identifiable assets: the customer base
- FF&E — FF&E stands for furniture
- Asset Sale — An asset sale is a transaction in which the buyer purchases specified business assets — equipment
See the full laundromat glossary for all 78 terms.
The Next Step
This page is general information about laundromat transactions, not legal, tax, or investment advice, and not a guarantee of sale price, timing, or financing approval. Verify current rules with your own CPA, attorney, lender, and the relevant state or municipal agency before acting.