What happens if the CRA disagrees with how the buyer and I allocated the price among assets?

An allocation agreed between a buyer and seller in the purchase agreement is a strong starting point, but it isn't automatically binding on the CRA. Where the CRA considers an allocation unreasonable — for example, if it looks like the parties allocated value in a way designed mainly to reduce combined tax rather than reflecting the assets' actual relative worth — it can reassess and reallocate the purchase price itself, adjusting how much of the gain is treated as goodwill, how much triggers recapture on equipment, and so on.

Because a reallocation on one side of the transaction often has consequences for the other side's numbers too, a CRA challenge to the allocation can affect both the buyer's and seller's tax filings, even though only one of them may have been reassessed directly. This is one of the reasons a genuinely arm's-length, commercially reasonable allocation, properly documented and consistently reported by both parties, holds up far better than an allocation chosen purely to minimize tax.

If the CRA does challenge an allocation, the usual objection and appeal processes are available, but the practical solution is prevention: negotiate and document a defensible, evidence-based allocation before closing, with professional advice on both sides.