26 U.S.C. § 1060 — Special allocation rules for certain asset acquisitions

(a) For an applicable asset acquisition, consideration must be allocated among acquired assets under section 338(b)(5), both to determine the transferee’s basis and the transferor’s gain or loss. A written agreement between buyer and seller about the allocation or fair market value binds both unless the Secretary^* finds it inappropriate. (b) Under regulations, both parties must report when and how required: (1) consideration allocated to section 197 intangibles; (2) changes to that amount; and (3) other information the Secretary needs. (c) An applicable asset acquisition is a direct or indirect transfer of business assets where the buyer’s basis is wholly based on consideration paid. It remains one if section 1031 applies to part of the transfer. (d) For partnership^*-property distributions or partnership-interest transfers, subsection (a) applies only to value section 197 intangibles for section 755; if section 755 applies, the transaction is an applicable asset acquisition for subsection (b). (e)(1) If a 10-percent owner transfers an entity interest and the owner or related person enters an employment, noncompete, royalty, lease, or other agreement with the buyer, owner and buyer must provide information the Secretary requires. (2) A 10-percent owner holds at least 10 percent by value immediately before transfer; section 318 and similar principles determine ownership. (3) A related person is related under section 267(b) or 707(b)(1). (f) Section 6721 covers penalties for failing to file a required return.