What is one advantage of an asset purchase for a buyer?

The choice that states tax deductions on the cost of assets is a key advantage of an asset purchase for a buyer. In an asset purchase, the buyer acquires individual assets rather than the entire business entity. This allows the buyer to allocate the purchase price to various tangible and intangible assets, which often leads to a step-up in basis for those assets. Consequently, the buyer can benefit from accelerated depreciation or amortization deductions on the acquired assets, reducing overall taxable income in future periods. This tax advantage can significantly enhance the financial benefits of the acquisition and improve cash flow for the buyer.

The other options, while they may carry some relevance to asset purchases, do not capture the primary financial advantage as clearly. For instance, reducing overall business risk is more nuanced, as it can depend on many factors related to the specific business being acquired. Minimizing legal compliance requirements is generally not a direct benefit of asset purchases, which may still require compliance with various regulations. Lastly, the negotiation process in an asset purchase can be complex, as multiple assets are involved, and the negotiations can vary accordingly. The tax deductions stemming from an asset purchase distinctly stand out as a significant financial incentive for buyers in these transactions.