In January of the current year, Park Corporation incurs $34,000 of legal costs associated with a patent

Question:

In January of the current year, Park incurs $34,000 of legal costs associated with a patent that was developed internally and has a legal life of 17 years. Park also acquired for cash the net assets of Central for $1,000,000. The following assets are specified in the purchase agreement:
Land ……………………………………………………………………. $ 200,000
Goodwill and going concern value …………………………………….. 100,000
Covenant not to compete ………………………………………………. 50,000
Licenses ………………………………………………………………… 125,000
Customer lists ………………………………………………………….. 25,000
Inventory ………………………………………………………………. 100,000
Equipment and other tangible depreciable business assets ……………. 400,000
Total ………………………………………………………………….. $1,000,000
a. What tax treatment should be accorded the ?
b. Assuming that you were advising Park during the negotiations before drafting the purchase agreement, what suggestions would you make regarding the allocation of the total purchase price to the individual assets? How could the purchase price of individual assets be substantiated?
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