Form 8594: Asset Acquisition Statement

Form 8594, also known as the Asset Acquisition Statement, is an Internal Revenue Service (IRS) document used to report the sale or purchase of a group of assets that constitute a functioning business. It's crucial when "goodwill or going concern value" is present in the transaction.

What does "goodwill or going concern value" mean?

This refers to the intangible value associated with a business beyond the value of its individual assets. It considers factors like customer base, reputation, established processes, and skilled workforce.

Who needs to file Form 8594?

Both the buyer (purchaser) and seller of the business assets must file Form 8594 if the following conditions are met:

A. Transfer of a Business: A group of assets is being sold that constitutes a complete or substantial portion of a functioning business.

B. Goodwill or Going Concern Value: The assets possess or could potentially possess intangible value beyond their individual worth.

C. Buyer's Basis Determined by Purchase Price: The buyer's basis in the acquired assets is solely determined by the amount paid for them.

What Does Form 8594 Do?

This form helps the IRS understand how the purchase price of the business assets is allocated. This allocation is important for calculating taxes on both sides of the transaction.

  • Seller: Knowing the allocated value helps determine capital gains or losses.
  • Buyer: The allocated value is used to calculate depreciation and amortization expenses for tax purposes.

What Information is Included on Form 8594?

The form captures details about the transaction, including:

  • Identifying information for both buyer and seller
  • Description of the transferred assets
  • Total purchase price
  • Allocation of the purchase price to various asset categories (e.g., land, machinery, furniture, patents)
  • Amount attributed to intangible assets like goodwill.