Schedule O 8865 Transfer of Property to a Foreign Partnership (under sec

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I.R.S. SPECIFICATIONS
TO BE REMOVED BEFORE PRINTING
INSTRUCTIONS TO PRINTERS
FORM 8594, PAGE 1 of 2
MARGINS: TOP 1⁄2", CENTER SIDES.
PRINTS: HEAD TO HEAD
PAPER: WHITE WRITING, SUB. 20.
INK: BLACK
FLAT SIZE: 17" x 11"
FOLD TO: 8 1⁄2" x 11" PERFORATE: (ON FOLD)
DO NOT PRINT — DO NOT PRINT — DO NOT PRINT — DO NOT PRINT

8594

Action

Date

O.K. to print
Revised proofs
requested

Asset Acquisition Statement

Form
(Rev. February 2006)

Signature

OMB No. 1545-1021

Under Section 1060

Department of the Treasury
Internal Revenue Service

䊳

Attach to your income tax return.

䊳

Attachment
Sequence No.

See separate instructions.

Name as shown on return

61

Identifying number as shown on return

Check the box that identifies you:
Purchaser
Seller

Part I

General Information

1 Name of other party to the transaction

Other party’s identifying number

Address (number, street, and room or suite no.)

City or town, state, and ZIP code

2 Date of sale

Part II
4

3 Total sales price (consideration)

Original Statement of Assets Transferred

Assets

Aggregate fair market value (actual amount for Class I)

Allocation of sales price

Class I

$

$

Class II

$

$

Class III

$

$

Class IV

$

$

Class V

$

$

Class VI and VII

$

$

Total

$

$

5

6

Did the purchaser and seller provide for an allocation of the sales price in the sales contract or in another
written document signed by both parties?
If “Yes,” are the aggregate fair market values (FMV) listed for each of asset Classes I, II, III, IV, V, VI, and
VII the amounts agreed upon in your sales contract or in a separate written document?

Yes

No

Yes

No

In the purchase of the group of assets (or stock), did the purchaser also purchase a license or a covenant
not to compete, or enter into a lease agreement, employment contract, management contract, or similar
arrangement with the seller (or managers, directors, owners, or employees of the seller)?

Yes

No

If “Yes,” attach a schedule that specifies (a) the type of agreement and (b) the maximum amount of
consideration (not including interest) paid or to be paid under the agreement. See instructions.
For Paperwork Reduction Act Notice, see separate instructions.

Cat. No. 63768Z

Form

8594

(Rev. 2-2006)

2
I.R.S. SPECIFICATIONS
TO BE REMOVED BEFORE PRINTING
INSTRUCTIONS TO PRINTERS
FORM 8594, PAGE 2 of 2
MARGINS: TOP 1⁄2", CENTER SIDES.
PRINTS: HEAD TO HEAD
PAPER: WHITE WRITING, SUB. 20.
INK: BLACK
FLAT SIZE: 17" x 11" FOLD TO: 8 1⁄2" x 11"
PERFORATE: (ON FOLD)
DO NOT PRINT — DO NOT PRINT — DO NOT PRINT — DO NOT PRINT

2
Supplemental Statement—Complete only if amending an original statement or previously filed
supplemental statement because of an increase or decrease in consideration. See instructions.

Form 8594 (Rev. 2-2006)

Part III

Page

7

Tax year and tax return form number with which the original Form 8594 and any supplemental statements were filed.

8

Assets

Allocation of sales price as previously reported

Increase or (decrease)

Redetermined allocation of sales price

Class I

$

$

$

Class II

$

$

$

Class III

$

$

$

Class IV

$

$

$

Class V

$

$

$

Class VI and VII

$

$

$

Total

$

9

$

Reason(s) for increase or decrease. Attach additional sheets if more space is needed.

Form

8594

(Rev. 2-2006)

PAGER/SGML

Userid: ________
Fileid: I8594.SGM

Leading adjust: 0%
(17-Feb-2006)

❏

Draft
(Init. & date)

❏

Ok to Print

Filename: D:\USERS\vghcb\documents\Epicfiles\2005 files\05I8594.SGM

Page 1 of 3

Instructions for Form 8594

10:30 - 17-FEB-2006

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

Instructions for Form 8594

Department of the Treasury
Internal Revenue Service

(Rev. February 2006)
Asset Acquisition Statement Under Section 1060
Section references are to the Internal Revenue Code unless otherwise noted.

General Instructions
Purpose of Form
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.

Who Must File
Generally, both the purchaser and
seller must file Form 8594 and attach
it to their income tax returns (Forms
1040, 1041, 1065, 1120, 1120S, etc.)
when there is a transfer of a group of
assets that make 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.
• A group of assets that makes up a
trade or business is exchanged for
like-kind property in a transaction to
which section 1031 applies. If section
1031 does not apply to all the assets
transferred, however, Form 8594 is
required for the part of the group of
assets to which section 1031 does
not apply. For information about such
a transaction, see Regulations
sections 1.1031(j)-1(b) and
1.1060-1(b)(8).
• A partnership interest is
transferred. See Regulations section

1.755-1(d) for special reporting
requirements. However, the purchase
of a partnership interest that is
treated for federal income tax
purposes as a purchase of
partnership assets, which constitute a
trade or business, is subject to
section 1060. In this case, the
purchaser must file Form 8594. See
Rev. Rul. 99-6, which is on page 6 of
Internal Revenue Bulletin 1999-6 at
http://www.irs.gov/pub/irs-irbs/
irb99-06.pdf, and Regulations section
1.1060-1(b)(4).

When To File
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.

Penalties
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.

Definitions
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:
• The presence of any section 197 or
other intangible assets (but the
transfer of such an asset in the
absence of other assets will not be a
trade or business);
• Any excess of the total paid for the
assets over the aggregate book value
Cat. No. 29292S

of the assets (other than goodwill or
going concern value) as shown in the
purchaser’s financial accounting
books and records; or
• A license, a lease agreement, a
covenant not to compete, a
management contract, an
employment contract, or other similar
agreements between purchaser and
seller (or managers, directors,
owners, or employees of the seller).
Consideration. The purchaser’s
consideration is the cost of the
assets. The purchaser’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 not less than any
nonrecourse debt to which the
property is subject.
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 target
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:

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Instructions for Form 8594

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• Debt instruments issued by

persons related at the beginning of
the day following the acquisition date
to the target under section 267(b) or
707;
• Contingent debt instruments
subject to Regulations sections
1.1275-4 and 1.483-4, or section 988,
unless the instrument is subject to the
noncontingent bond method of
Regulations section 1.1275-4(b) or is
described in Regulations section
1.988-2(b)(2)(i)(B)(2); and
• Debt instruments convertible into
the stock of the issuer or other
property.
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 taxable 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.
Note. Furniture and fixtures,
buildings, land, vehicles, and
equipment, which 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:
• Workforce in place;
• Business books and records,
operating systems, or any other
information base, process, design,
pattern, know-how, formula, or similar
item;
• Any customer-based intangible;
• Any supplier-based intangible;
• Any license, permit, or other right
granted by a government unit;
• Any covenant not to compete
entered into in connection with the
acquisition of an interest in a trade or
a business; and
• Any franchise (including a sports
franchise acquired after October 22,
2004), trademark, or trade name.
However, the term “section 197
intangible” does not include any of
the following:
• An interest in a corporation,
partnership, trust, or estate;
• Interests under certain financial
contracts;
• Interests in land;
• Certain computer software;
• Certain separately acquired
interests in films, sound recordings,

video tapes, books, or other similar
property;
• Interests under leases of tangible
property;
• Certain separately acquired rights
to receive tangible property or
services;
• Certain separately acquired
interests in patents or copyrights;
• Interests under indebtedness;
• Professional sports franchises
acquired before October 23, 2004;
and
• Certain transactions costs.
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 for the allocation of
the sales price among the
amortizable section 197 intangibles
and other assets transferred. 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 also is subject to any
applicable limits under the Internal
Revenue Code or general principles
of tax law.
Consideration should be allocated
as follows.
1. Reduce the consideration by
the amount of Class I assets
transferred.
2. Allocate the remaining
consideration to Class II assets, then
to Class III, IV, V, and VI assets in
that order. Within each class, allocate
the remaining consideration to the
class assets in proportion to their fair
market values on the purchase date.
3. Allocate consideration to Class
VII assets.
If an asset in one of the
classifications described above can
be included in more than one class,
choose the lower numbered class
(e.g., 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
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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.
For an increase or decrease
related to a patent, copyright, etc.,
see Specific Allocation, later.
Allocation of increase. Allocate
an increase in consideration as
described under Allocation of
consideration. 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.
Allocation of decrease. Allocate
a decrease in consideration as
follows.
1. Reduce the amount previously
allocated to Class VII assets.
2. Reduce the amount previously
allocated to Class VI assets, then to
Class V, IV, III, and II assets in that
order. Within each class, allocate the
decrease among the class assets in
proportion to their fair market values
on the purchase date.
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.
Patents, copyrights, and similar
property. You must make a specific
allocation (defined below) if an
increase or decrease in consideration
is the result of a contingency that

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Instructions for Form 8594

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The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

directly relates to income produced
by a particular intangible asset, such
as a patent, a secret process, or a
copyright, and the increase or
decrease is related only to such asset
and not to other assets. If the specific
allocation rule does not apply, make
an allocation of any increase or
decrease as you would for any other
assets as described under Allocation
of increase and Allocation of
decrease.
Specific allocation. Limited to the
fair market value of the asset, any
increase or decrease in consideration
is allocated first specifically to the
patent, copyright, or similar property
to which the increase or decrease
relates, and then to the other assets
in the order described under
Allocation of increase and Allocation
of decrease. For purposes of applying
the fair market value limit to the
patent, copyright, or similar property,
the fair market value of such asset is
redetermined when the increase or
decrease is taken into account by
considering only the reasons for the
increase or decrease. The fair market
values of the other assets are not
redetermined.

Specific Instructions
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.

Part I—General Information
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.

Part II—Original Statement
of Assets Transferred
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.

Part III—Supplemental
Statement
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, on page 2,
and When To File, on page 1. 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 “2004 Form
1040.”

Paperwork Reduction Act Notice. We ask for the information on this form to carry out the Internal Revenue laws of
the United States. You are required to give us the information. We need it to ensure that you are complying with these
laws and to allow us to figure and collect the right amount of tax.
You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act
unless the form displays a valid OMB control number. Books or records relating to a form or its instructions must be
retained as long as their contents may become material in the administration of any Internal Revenue law. Generally,
tax returns and return information are confidential, as required by section 6103.
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.

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