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Allocation rules are governed by section 1060, which
generally mandates the use of the residual method of purchase
price allocation as set forth in section 338(b)(5) and the
accompanying regulations. Sec. 1.1060-1T(a)(1), Temporary Income
Tax Regs., 53 Fed. Reg. 27039 (July 18, 1988).
However, as amended by the Omnibus Budget Reconciliation Act
of 1990 (OBRA 1990), Pub. L. 101-508, sec. 11323(a), 104 Stat.
1388, 1388-464, section 1060(a) further provides:
If in connection with an applicable asset acquisition,
the transferee and transferor agree in writing as to
the allocation of any consideration, or as to the fair
market value of any of the assets, such agreement shall
be binding on both the transferee and transferor unless
the Secretary determines that such allocation (or fair
market value) is not appropriate.
This amendment is generally effective for acquisitions made after
October 9, 1990, and applies to these cases. OBRA 1990 sec.
11323(d), 104 Stat. 1388-465.
The legislative history concerning the above amendment to
section 1060(a), among other things, provides, in pertinent part:
The committee does not intend to restrict in any
way the ability of the IRS to challenge the taxpayers'
allocation to any asset or to challenge the taxpayers'
determination of the fair market value of any asset by
any appropriate method, particularly where there is a
lack of adverse tax interests between the parties. [H.
Rept. 101-881, at 351 (1990).]
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