Transaction Price Segregation

Transaction Price Segregation (TPS) allocates the components of value in the acquisition of a hotel property proactively for State & Local Tax purposes. The value of these business assets is referred to in the accounting world as a “going concern and/or business enterprise value.”

There are three individual components that Paradigm examines:

  • Real Estate – tangible property that makes up the structural component of the purchase.

  • Personal Property – tangible property that consists of the objects within the real estate required to operate the business such as office equipment, furniture, security systems, etc.

  • Intangible Assets – personal property that has no physical presence, such as franchise value, workforce in place, start-up costs, trade secrets, copyrights, name of the business, and reputation.

Quantitative Example of TPS Benefits

TPS allocates the components of value in the acquisition of a hotel or resort property proactively for State & Local Tax purposes. The value of these business assets is referred to in the accounting world as a “going concern and/or business enterprise value.”

  Allocated Unallocated / Under Allocated
Purchase Price $50,000,000 $50,000,000
Real Estate Component $35,000,000 $45,000,000
Tangible Personal Property $5,000,000 $5,000,000
Intangible Personal Property $10,000,000 $0
Transfer Taxes $700,000 $900,000
Real Estate Tax Basis Per Deed $35,000,000 $45,000,000

$100B

buildings icon

0

map icon

0YRS

people icon