{{More citations needed, date=March 2007 Purchase price adjustments capture the change in value of an

asset In financial accounting, an asset is any resource owned or controlled by a business or an economic entity. It is anything (tangible or intangible) that can be used to produce positive economic value. Assets represent value of ownership that can b ...

typically between the negotiation and closing.

Example

Antonio purchased property from Shylock for $50,000. At closing, Antonio paid $10,000 to Shylock and executed a

promissory note A promissory note, sometimes referred to as a note payable, is a legal instrument (more particularly, a financing instrument and a debt instrument), in which one party (the ''maker'' or ''issuer'') promises in writing to pay a determinate sum of ...

payable to "Shylock or order" for $40,000. Following the closing, Antonio approached Shylock, upset that the property was in fact worth only $42,000. After a few weeks of negotiations, the parties agreed to reduce the amount of the promissory note to $32,000.

Federal Tax Implications

A ''Purchase Price Adjustment'' is not included as gross income under the U.S. tax code. The adjustment between the parties is merely re-setting the amount of the purchase price. Additionally, the price adjustment has to exist between the seller and the buyer (no third parties can be involved).''Ibid.''

References

Financial markets