Purchase Price Allocation Rules: Sections 1060, 338, And 197

Originally published June, 2003. To read this article in full, please go to the bottom of this page.

I. INTRODUCTION

A. One of the most publicized and long-awaited business provisions contained in the Omnibus Budget Reconciliation Act of 1993, P.L. 103-66, 107 Stat. 312 (1993) (the "1993 Act") was section 197 of the Internal Revenue Code of 1986 (the "Code"), which governs the tax treatment of acquired intangible assets.

B. However, section 197 cannot be analyzed in isolation. Since it comes into play whenever there is an allocation of consideration to an amortizable section 197 intangible, a basic understanding of the allocation rules of sections 1060 and 338(h)(10) is critical.