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Department of the Treasury
Internal Revenue Service
Instructions for Form 8594

(Rev. November 2021)
Asset Acquisition Statement Under Section 1060

Section references are to the Internal Revenue special reporting requirements. However, Consideration. The purchaser's
Code unless otherwise noted. the purchase of a partnership interest that consideration is the cost of the assets.
is treated for federal income tax purposes The seller's consideration is the amount
Future Developments as a purchase of partnership assets, realized.
For the latest information about which constitute a trade or business, is
developments related to Form 8594 and subject to section 1060. In this case, the Fair market value. Fair market value is
its instructions, such as legislation purchaser must file Form 8594. See Rev. the gross fair market value unreduced by
enacted after they were published, go to Rul. 99-6, 1999-6 I.R.B. 6, available at mortgages, liens, pledges, or other
IRS.gov/Form8594. IRS.gov/pub/irs-irbs/irb99-06.pdf. liabilities. However, for determining the
seller's gain or loss, generally, the fair
When To File market value of any property is treated as
General Instructions Generally, attach Form 8594 to your being not less than any nonrecourse debt
income tax return for the year in which the to which the property is subject. Also, a
Purpose of Form sale date occurred. liability that was incurred as a result of the
acquisition of the property is disregarded
Both the seller and purchaser of a group of If the amount allocated to any asset is to the extent that such liability was not
assets that makes up a trade or business increased or decreased after the year in taken into account in determining the
must use Form 8594 to report such a sale which the sale occurs, the seller and/or basis in such property.
if goodwill or going concern value purchaser (whoever is affected) must
attaches, or could attach, to such assets complete Parts I and III of Form 8594 and Classes of assets. The following
and if the purchaser's basis in the assets attach the form to the income tax return for definitions are the classifications for
is determined only by the amount paid for the year in which the increase or decrease deemed or actual asset acquisitions.
the assets. is taken into account. Class I assets are cash and general
Form 8594 must also be filed if the deposit accounts (including savings and
purchaser or seller is amending an original Penalties checking accounts) other than certificates
or a previously filed supplemental Form If you do not file a correct Form 8594 by of deposit held in banks, savings and loan
8594 because of an increase or decrease the due date of your return and you cannot associations, and other depository
in the purchaser's cost of the assets or the show reasonable cause, you may be institutions.
amount realized by the seller. subject to penalties. See sections 6721 Class II assets are actively traded
through 6724.
Who Must File personal property within the meaning of
Generally, both the purchaser and seller Definitions section 1092(d)(1) and Regulations
section 1.1092(d)-1 (determined without
must file Form 8594 and attach it to their Trade or business. A group of assets regard to section 1092(d)(3)). In addition,
income tax returns (Forms 1040, 1041, makes up a trade or business if goodwill or Class II assets include certificates of
1065, 1120, 1120-S, etc.) when there is a going concern value could under any deposit and foreign currency even if they
transfer of a group of assets that makes circumstances attach to such assets. A are not actively traded personal property.
up a trade or business (defined below) group of assets can also qualify as a trade Class II assets do not include stock of
and the purchaser's basis in such assets or business if it qualifies as an active trade seller's affiliates, whether or not actively
is determined wholly by the amount paid or business under section 355 (relating to traded, other than actively traded stock
for the assets. This applies whether the distributions of stock in controlled described in section 1504(a)(4). Examples
group of assets constitutes a trade or corporations). of Class II assets include U.S.
business in the hands of the seller, the Factors to consider in determining Government securities and publicly traded
purchaser, or both. whether goodwill or going concern value stock.
If the purchaser or seller is a controlled could attach include: Class III assets are assets that the
foreign corporation (CFC), each U.S. • The presence of any section 197 or taxpayer marks to market at least annually
shareholder should attach Form 8594 to other intangible assets (provided that the for federal income tax purposes and debt
its Form 5471. transfer of such an asset in the absence of instruments (including accounts
Exceptions. You are not required to file other assets will not be a trade or receivable). However, Class III assets do
Form 8594 if any of the following apply. business); not include:
• A group of assets that makes up a trade • Any excess of the total paid for the • Debt instruments issued by persons
or business is exchanged for like-kind assets over the aggregate book value of related at the beginning of the day
property in a transaction to which section the assets (other than goodwill or going following the acquisition date to the target
1031 applies. If section 1031 does not concern value) as shown in the under section 267(b) or 707;
apply to all the assets transferred, purchaser's financial accounting books • Contingent debt instruments subject to
however, Form 8594 is required for the and records; or Regulations sections 1.1275-4 and
part of the group of assets to which • A license, a lease agreement, a 1.483-4, or section 988, unless the
section 1031 does not apply. For covenant not to compete, a management instrument is subject to the noncontingent
information about such a transaction, see contract, an employment contract, or other bond method of Regulations section
Regulations sections 1.1031(j)-1(b) and similar agreements between purchaser 1.1275-4(b) or is described in Regulations
1.1060-1(b)(8). and seller (or managers, directors, section 1.988-2(b)(2)(i)(B)(2); and
• A partnership interest is transferred. owners, or employees of the seller). • Debt instruments convertible into the
See Regulations section 1.755-1(d) for stock of the issuer or other property.

Sep 08, 2021 Cat. No. 29292S

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Class IV assets are stock in trade of in each acquired asset and the seller's If an asset has been disposed of,
the taxpayer or other property of a kind gain or loss on the transfer of each asset. depreciated, amortized, or depleted by the
that would properly be included in the Use the residual method under sections purchaser before the increase occurs, any
inventory of the taxpayer if on hand at the 1.338-6 and 1.338-7, substituting amount allocated to that asset by the
close of the tax year, or property held by consideration for ADSP and AGUB, for the purchaser must be properly taken into
the taxpayer primarily for sale to allocation of the consideration to assets account under principles of tax law
customers in the ordinary course of its sold and assets purchased, respectively. applicable when part of the cost of an
trade or business. See Regulations section 1.1060-1(c). asset (not previously reflected in its basis)
Class V assets are all assets other The amount allocated to an asset, is paid after the asset has been disposed
than Class I, II, III, IV, VI, and VII assets. other than a Class VII asset, cannot of, depreciated, amortized, or depleted.
exceed its fair market value on the Allocation of decrease. Allocate a
Note. Furniture and fixtures, buildings, purchase date. The amount you can decrease in consideration as follows.
land, vehicles, and equipment that allocate to an asset is also subject to any
constitute all or part of a trade or business applicable limits under the Internal 1. Reduce the amount previously
(defined earlier) are generally Class V Revenue Code or general principles of tax allocated to Class VII assets.
assets. law. 2. Reduce the amount previously
Class VI assets are all section 197 Consideration should be allocated as allocated to Class VI assets, then to Class
intangibles (as defined in section 197) follows. V, IV, III, and II assets in that order. Within
each class, allocate the decrease among
except goodwill and going concern value. 1. Reduce the consideration by the the class assets in proportion to their fair
Section 197 intangibles include: amount of Class I assets transferred. market values on the purchase date.
• Workforce in place;
• Business books and records, operating 2. Allocate the remaining
systems, or any other information base, consideration to Class II assets, then to You cannot decrease the amount
process, design, pattern, know-how, Class III, IV, V, and VI assets in that order. allocated to an asset below zero. If an
formula, or similar item; Within each class, allocate the remaining asset has a basis of zero at the time the
• Any customer-based intangible; consideration to the class assets in decrease is taken into account because it
• Any supplier-based intangible; proportion to their fair market values on has been disposed of, depreciated,
• Any license, permit, or other right the purchase date. amortized, or depleted by the purchaser
under section 1060, the decrease in
granted by a government unit; 3. Allocate consideration to Class VII consideration allocable to such asset must
• Any covenant not to compete entered assets. be properly taken into account under the
into in connection with the acquisition of principles of tax law applicable when the
an interest in a trade or a business; and If an asset in one of the classifications
• Any franchise, trademark, or trade described above can be included in more cost of an asset (previously reflected in
name (however, see exception below for than one class, choose the lower basis) is reduced after the asset has been
certain professional sports franchises). numbered class (for example, if an asset disposed of, depreciated, amortized, or
could be included in Class III or IV, choose depleted. An asset is considered to have
See section 197(d) for more Class III). been disposed of to the extent the
information. decrease allocated to it would reduce its
Reallocation after an increase or de-
The term “section 197 intangible” does basis below zero.
crease in consideration. If an increase
not include:
or decrease in consideration that must be
• An interest in a corporation,
taken into account to redetermine the
partnership, trust, or estate; Specific Instructions
seller's amount realized on the sale, or the
• Interests under certain financial For an original statement, complete Parts I
purchaser's cost basis in the assets,
contracts; occurs after the purchase date, the seller and II. For a Supplemental Statement,
• Interests in land; and/or purchaser must allocate the complete Parts I and III.
• Certain computer software; increase or decrease among the assets. If Enter your name and taxpayer
• Certain separately acquired interests in the increase or decrease occurs in the identification number (TIN) at the top of
films, sound recordings, videotapes,
same tax year as the purchase date,
books, or other similar property; the form. Then check the box for
consider the increase or decrease to have Purchaser or Seller.
• Interests under leases of tangible occurred on the purchase date. If the
property; increase or decrease occurs after the tax Part I—General
• Certain separately acquired rights to year of the purchase date, consider it in
receive tangible property or services; the tax year in which it occurs. Information
• Certain separately acquired interests in
patents or copyrights; Allocation of increase. Allocate an Line 1. Enter the name, address, and TIN
• Interests under indebtedness; increase in consideration as follows. of the other party to the transaction
(purchaser or seller). You are required to
• Professional sports franchises acquired 1. Allocate the increase in enter the TIN of the other party. If the other
before October 23, 2004; and consideration to Class I assets. party is an individual or sole proprietor,
• Certain transactions costs.
2. Allocate any remaining amount of enter the social security number. If the
See section 197(e) for more consideration to each of the following other party is a corporation, partnership, or
information. classes (Class II, III, etc.). other entity, enter the employer
Class VII assets are goodwill and identification number.
going concern value (whether or not the The number of classes may vary
goodwill or going concern value qualifies depending on the year of the acquisition. Line 2. Enter the date on which the sale
as a section 197 intangible). Increase the amounts previously allocated of the assets occurred.
to the assets in each class in proportion to Line 3. Enter the total consideration
Allocation of consideration. An their fair market values on the purchase transferred for the assets.
allocation of the purchase price must be date (do not allocate to any asset in
made to determine the purchaser's basis excess of its fair market value).

-2- Instructions for Form 8594 (Rev. 11-2021)

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Part II—Original Statement                    after an increase or decrease in              The time needed to complete and file 
                                              consideration and When To File, earlier.      this tax form will vary depending on 
of Assets Transferred                         Give the reason(s) for the increase or        individual circumstances. The estimated 
Line 4. For a particular class of assets,     decrease in allocation. Also, enter the tax   burden for individual taxpayers filing this 
enter the total fair market value of all the  year(s) and form number with which the        form is approved under OMB control 
assets in the class and the total allocation  original and any Supplemental Statements      number 1545-0074 and is included in the 
of the sales price. For Classes VI and VII,   were filed. For example, enter “2021 Form     estimates shown in the instructions for 
enter the total fair market value of Class VI 1040.”                                        their individual income tax return. The 
and Class VII combined, and the total                                                       estimated burden for all other taxpayers 
portion of the sales price allocated to       Paperwork Reduction Act Notice.       We      who file this form is shown below.
Class VI and Class VII combined.              ask for the information on this form to carry 
                                              out the Internal Revenue laws of the          Recordkeeping. . . . . . . . . . . . .      11 hr.
Line 6. This line must be completed by        United States. You are required to give us 
the purchaser and the seller. To determine    the information. We need it to ensure that    Learning about the law or the               2 hr., 
the maximum consideration to be paid,         you are complying with these laws and to      form. . . . . . . . . . . . . . . . . . . . 34 min.
assume that any contingencies specified       allow us to figure and collect the right      Preparing and sending the form              2 hr., 
in the agreement are met and that the         amount of tax.                                to the IRS. . . . . . . . . . . . . . . . . 52 min. 
consideration paid is the highest amount 
possible. If you cannot determine the         You are not required to provide the 
maximum consideration, state how the          information requested on a form that is 
consideration will be computed and the        subject to the Paperwork Reduction Act        If you have comments concerning the 
payment period.                               unless the form displays a valid OMB          accuracy of these time estimates or 
                                              control number. Books or records relating     suggestions for making this form simpler, 
Part III—Supplemental                         to a form or its instructions must be         we would be happy to hear from you. You 
                                              retained as long as their contents may        can write to the IRS at the address listed in 
Statement                                                                                   the instructions for the tax return with 
                                              become material in the administration of 
Complete Part III and file a new Form 8594    any Internal Revenue law. Generally, tax      which this form is filed.
for each year that an increase or decrease    returns and return information are 
in consideration occurs. See Reallocation     confidential, as required by section 6103.

Instructions for Form 8594 (Rev. 11-2021)                       -3-

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