Section references are to the Internal Revenue Code unless otherwise noted.
For the latest information about developments related to Form 8594 and its instructions, such as legislation enacted after they were published, go to
IRS.gov/Form8594.
Both the seller and purchaser of a group of assets that makes up a trade or business must use Form 8594 to report such a sale if goodwill or going concern value attaches, or could attach, to such assets and if the purchaser's basis in the assets is determined only by the amount paid for the assets.
Form 8594 must also be filed if the purchaser or seller is amending an original or a previously filed supplemental Form 8594 because of an increase or decrease in the purchaser's cost of the assets or the amount realized by the seller.
Generally, both the purchaser and seller must file Form 8594 and attach it to their income tax returns (Forms 1040, 1041, 1065, 1120, 1120-S, etc.) when there is a transfer of a group of assets that makes up a trade or business (defined below) and the purchaser's basis in such assets is determined wholly by the amount paid for the assets. This applies whether the group of assets constitutes a trade or business in the hands of the seller, the purchaser, or both.
If the purchaser or seller is a controlled foreign corporation (CFC), each U.S. shareholder should attach Form 8594 to its Form 5471.
Exceptions.
You are not required to file Form 8594 if any of the following apply.
Generally, attach Form 8594 to your income tax return for the year in which the sale date occurred.
If the amount allocated to any asset is increased or decreased after the year in which the sale occurs, the seller and/or purchaser (whoever is affected) must complete Parts I and III of Form 8594 and attach the form to the income tax return for the year in which the increase or decrease is taken into account.
If you do not file a correct Form 8594 by the due date of your return and you cannot show reasonable cause, you may be subject to penalties. See sections 6721 through 6724.
Trade or business.
A group of assets makes up a trade or business if goodwill or going concern value could under any circumstances attach to such assets. A group of assets can also qualify as a trade or business if it qualifies as an active trade or business under section 355 (relating to distributions of stock in controlled corporations).
Factors to consider in determining whether goodwill or going concern value could attach include:
Consideration.
The purchaser's consideration is the cost of the assets. The seller's consideration is the amount realized.
Fair market value.
Fair market value is the gross fair market value unreduced by mortgages, liens, pledges, or other liabilities. However, for determining the seller's gain or loss, generally, the fair market value of any property is treated as being not less than any nonrecourse debt to which the property is subject. Also, a liability that was incurred as a result of the acquisition of the property is disregarded to the extent that such liability was not taken into account in determining the basis in such property.
Classes of assets.
The following definitions are the classifications for deemed or actual asset acquisitions.
Class I assets are cash and general deposit accounts (including savings and checking accounts) other than certificates of deposit held in banks, savings and loan associations, and other depository institutions.
Class II assets are actively traded personal property within the meaning of section 1092(d)(1) and Regulations section 1.1092(d)-1 (determined without regard to section 1092(d)(3)). In addition, Class II assets include certificates of deposit and foreign currency even if they are not actively traded personal property. Class II assets do not include stock of seller's affiliates, whether or not actively traded, other than actively traded stock described in section 1504(a)(4). Examples of Class II assets include U.S. Government securities and publicly traded stock.
Class III assets are assets that the taxpayer marks to market at least annually for federal income tax purposes and debt instruments (including accounts receivable). However, Class III assets do not include:
Class IV assets are stock in trade of the taxpayer or other property of a kind that would properly be included in the inventory of the taxpayer if on hand at the close of the tax year, or property held by the taxpayer primarily for sale to customers in the ordinary course of its trade or business.
Class V assets are all assets other than Class I, II, III, IV, VI, and VII assets.
Furniture and fixtures, buildings, land, vehicles, and equipment that constitute all or part of a trade or business (defined earlier) are generally Class V assets.
Class VI assets are all section 197 intangibles (as defined in section 197) except goodwill and going concern value. Section 197 intangibles include:
See section 197(e) for more information.
Class VII assets are goodwill and going concern value (whether or not the goodwill or going concern value qualifies as a section 197 intangible).
Allocation of consideration.
An allocation of the purchase price must be made to determine the purchaser's basis in each acquired asset and the seller's gain or loss on the transfer of each asset. Use the residual method under sections 1.338-6 and 1.338-7, substituting consideration for ADSP and AGUB, for the allocation of the consideration to assets sold and assets purchased, respectively. See Regulations section 1.1060-1(c).
The amount allocated to an asset, other than a Class VII asset, cannot exceed its fair market value on the purchase date. The amount you can allocate to an asset is also subject to any applicable limits under the Internal Revenue Code or general principles of tax law.
Consideration should be allocated as follows.
If an asset in one of the classifications described above can be included in more than one class, choose the lower numbered class (for example, if an asset could be included in Class III or IV, choose Class III).
Reallocation after an increase or decrease in consideration.
If an increase or decrease in consideration that must be taken into account to redetermine the seller's amount realized on the sale, or the purchaser's cost basis in the assets, occurs after the purchase date, the seller and/or purchaser must allocate the increase or decrease among the assets. If the increase or decrease occurs in the same tax year as the purchase date, consider the increase or decrease to have occurred on the purchase date. If the increase or decrease occurs after the tax year of the purchase date, consider it in the tax year in which it occurs.
Allocate an increase in consideration as follows.
The number of classes may vary depending on the year of the acquisition. Increase the amounts previously allocated to the assets in each class in proportion to their fair market values on the purchase date (do not allocate to any asset in excess of its fair market value).
If an asset has been disposed of, depreciated, amortized, or depleted by the purchaser before the increase occurs, any amount allocated to that asset by the purchaser must be properly taken into account under principles of tax law applicable when part of the cost of an asset (not previously reflected in its basis) is paid after the asset has been disposed of, depreciated, amortized, or depleted.
Allocate a decrease in consideration as follows.
You cannot decrease the amount allocated to an asset below zero. If an asset has a basis of zero at the time the decrease is taken into account because it has been disposed of, depreciated, amortized, or depleted by the purchaser under section 1060, the decrease in consideration allocable to such asset must be properly taken into account under the principles of tax law applicable when the cost of an asset (previously reflected in basis) is reduced after the asset has been disposed of, depreciated, amortized, or depleted. An asset is considered to have been disposed of to the extent the decrease allocated to it would reduce its basis below zero.
For an original statement, complete Parts I and II. For a Supplemental Statement, complete Parts I and III.
Enter your name and taxpayer identification number (TIN) at the top of the form. Then check the box for Purchaser or Seller.
Line 1.
Enter the name, address, and TIN of the other party to the transaction (purchaser or seller). You are required to enter the TIN of the other party. If the other party is an individual or sole proprietor, enter the social security number. If the other party is a corporation, partnership, or other entity, enter the employer identification number.
Line 2.
Enter the date on which the sale of the assets occurred.
Line 3.
Enter the total consideration transferred for the assets.
Line 4.
For a particular class of assets, enter the total fair market value of all the assets in the class and the total allocation of the sales price. For Classes VI and VII, enter the total fair market value of Class VI and Class VII combined, and the total portion of the sales price allocated to Class VI and Class VII combined.
Line 6.
This line must be completed by the purchaser and the seller. To determine the maximum consideration to be paid, assume that any contingencies specified in the agreement are met and that the consideration paid is the highest amount possible. If you cannot determine the maximum consideration, state how the consideration will be computed and the payment period.
Complete Part III and file a new Form 8594 for each year that an increase or decrease in consideration occurs. See Reallocation after an increase or decrease in consideration and When To File, earlier. Give the reason(s) for the increase or decrease in allocation. Also, enter the tax year(s) and form number with which the original and any Supplemental Statements were filed. For example, enter "2021 Form 1040."
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The time needed to complete and file this tax form will vary depending on individual circumstances. The estimated burden for individual taxpayers filing this form is approved under OMB control number 1545-0074 and is included in the estimates shown in the instructions for their individual income tax return. The estimated burden for all other taxpayers who file this form is shown below.
| Recordkeeping | 11 hr. |
| Learning about the law or the form | 2 hr., 34 min. |
| Preparing and sending the form to the IRS | 2 hr., 52 min. |
If you have comments concerning the accuracy of these time estimates or suggestions for making this form simpler, we would be happy to hear from you. You can write to the IRS at the address listed in the instructions for the tax return with which this form is filed.