U.S. Individual Income Tax Return Forms

Instructions for Form 8594
(Rev. December 2012)

Department of the Treasury
Internal Revenue Service

Asset Acquisition Statement Under Section 1060
Section references are to the Internal Revenue
Code unless otherwise noted.

Future
Developments
For the latest information about
developments related to Form 8594 and
its instructions, such as legislation
enacted after they were published, go to
www.irs.gov/form8594.

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
Aug 28, 2012

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, 1999-6, I.R.B. 6, available at
http://www.irs.gov/pub/irs-irbs/
irb99-06.pdf.

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 (provided that 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 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
Cat. No. 29292S

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 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:
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, trademark, or trade
name (however, see exception below for
certain professional sports franchises).
See section 197 (d) for more
information.
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 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 asset 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 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 de­
crease 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.
For an increase or decrease related to
a patent, copyright, etc., see Specific
Allocation, later.
Allocation of increase. Allocate an
increase in consideration as follows.
1. Allocate the increase in
consideration to Class I assets.

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2. Allocate any remaining amount
consideration to each of the following
classes (Class II, III, etc.).
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 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.
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 prop­
erty. You must make a specific allocation
(defined below) if an increase or decrease
in consideration is the result of a
contingency that 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.

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, 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 “2012 Form
1040.”

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

Paperwork Reduction Act Notice. We ask for the information on this form to carry out the Internal Revenue laws of the United
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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
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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.

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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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