If you’re buying or selling a business, you need to be familiar with IRS Form 8594: Asset Acquisition Statement Under Section 1060. It reports the sale of a business and assigns the purchase price to the acquired assets.
To fill out Form 8594, gather information about the sale, including the assets involved and their cost basis. Determine which assets are depreciated for tax purposes. This form ensures accurate reporting for maximum deductions.
Complete the Form 8594 example on this page. Read the instructions carefully. Understand the requirements for each section, including definitions of assets (real and personal), depreciation recapture calculation, and eligible assets for a stepped-up basis.
Form 8594 is required by the Internal Revenue Service (IRS) when a buyer and seller agree to allocate the purchase price of a business to specific assets. This is an important form because it affects the tax treatment of the transaction for both parties. The form is required for all asset acquisitions that fall under Section 1060 of the Internal Revenue Code.
If the purchase price is not allocated to specific assets, the buyer will not be able to depreciate or amortize the assets, and the seller may not be able to claim a loss on the sale of any assets that are subsequently disposed of. Failure to file the form can also result in penalties and interest charges.
IRS Form 8594 is an important form that must be filed when a buyer and seller agree to allocate the purchase price of a business to specific assets. Failure to file the form can result in penalties and interest charges.
The form consists of three (3) parts and requires both the buyer and seller to provide their details on the form. If you’re planning to buy or sell a business, be sure to consult with a tax professional to ensure that you comply with all the necessary requirements.
Part I contains general information. This section requires you to provide the other party to the transaction, their identifying number, address, date of sale, and the total sale price of the asset involved in the transaction. The buyer must also indicate whether any of the assets are depreciable for tax purposes.
Part II contains the original statement of assets transferred. Separated into three columns, this section details the class of assets, the aggregate fair market value of each, and the allocation of the sales price. This table is followed by a few yes or no questions pertaining to the details of the sale.
Below are the definitions of each asset class:
Finally, Part III contains a supplemental statement that an individual must complete if amending an original or previously filed supplemental statement because of an increase or decrease in consideration.
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