Selling business property? Don’t overlook the purchase price allocation

Description

Abstract: The allocation of a property’s value between the building and the land can have significant tax implications for the property’s seller. This article explains that this is because gains on the sale of business property — to the extent of depreciation taken or allowed — is taxable at ordinary income tax rates up to 25%. The article notes that if the owner can demonstrate that most or all of the gain is attributable to increases in the value of the land, he or she may be able to reduce the tax burden significantly.