Form 8594 is used to report the sale or purchase of a group of assets that make up a trade or business. It is required when goodwill or going concern value is part of the transaction and the buyer’s basis in the assets is determined solely by the amount paid.
When is Form 8594 required?
Form 8594 must be filed by both the buyer and the seller and attached to their respective tax returns for the year of the transfer if:
- Goodwill or going concern value attaches, or could attach, to the assets
- The purchaser’s basis in the assets is determined only by the amount paid
Going concern value refers to the added value of assets because they are part of an ongoing business. It includes the ability of the business to continue operating and generating income after a change in ownership.
Goodwill is the value of a business based on expected continued customer patronage due to its name, reputation, or other factors.
When is Form 8594 not required?
Form 8594 is not required if:
- The assets transferred do not include goodwill or going concern value
- The transaction is a like-kind exchange (unless assets are transferred separately from the exchange)
- The sale involves a partnership interest, unless the transaction is treated as a purchase of partnership assets for federal tax purposes
What does Form 8594 report?
Form 8594 is used to allocate the total purchase price among seven asset classes based on fair market value. This allocation helps the seller determine any taxable gain and allows the buyer to establish the correct basis for depreciation and other tax purposes.
What are the parts of Form 8594?
- Part I identifies the other party to the transaction, the date of sale, and the total consideration
- Part II reports the allocation of the purchase price across the seven asset classes and includes questions about the consistency of reporting and legal obligations
- Part III is used to amend a previously filed Form 8594 if there is a change in the buyer’s cost or the seller’s amount realized
Program Entry
To locate Form 8594, access your return and go to::
- Go to Federal
- Select Miscellaneous Forms
- Choose Other Miscellaneous Forms
- Then select Asset Acquisition Statement Under Section 1060