- Source: Purchase price adjustment
Purchase price adjustments capture the change in value of an asset typically between the negotiation and closing.
Example
Antonio purchased property from Shylock for $50,000. At closing, Antonio paid $10,000 to Shylock and executed a promissory note payable to "Shylock or order" for $40,000. Following the closing, Antonio approached Shylock, upset that the property was in fact worth only $42,000. After a few weeks of negotiations, the parties agreed to reduce the amount of the promissory note to $32,000.
Federal Tax Implications
A Purchase Price Adjustment is not included as gross income under the U.S. tax code. The adjustment between the parties is merely re-setting the amount of the purchase price. Additionally, the price adjustment has to exist between the seller and the buyer (no third parties can be involved).
References
Kata Kunci Pencarian:
- Purchase price adjustment
- Price adjustment
- Purchasing power parity
- Price adjustment (retail)
- Re-trade
- Anchoring effect
- Consumer price index
- Expert determination
- Cancellation-of-debt income
- Real and nominal value
