In the current year, Coastal Corporation acquires all of the net assets of Acorn Corporation for $2,000,000. The purchase agreement allocated the following amounts to the individual assets and liabilities:
Land and building ………………………………………$1,400,000
Accounts receivable …………………………………….. 200,000
Inventory ………………………………………............... 300,000
Goodwill ………………………………………............... 400,000
Patents (remaining legal life of ten years) ……………… 100,000
Covenant not to compete ……………………………….. 200,000
Liabilities ……………………………………….............. (600,000)
Total ………………………………………..................... $2,000,000
What tax issues should Coastal Corporation consider relative to the asset acquisitions?