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AH XSL/XML Fileid: Instructions/I8594/201212/A/XML/Cycle03/source (Init. & Date) _______

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Department of the Treasury
Instructions for Form 8594 Internal Revenue Service

(Rev. December 2012)
Asset Acquisition Statement Under Section 1060

Section references are to the Internal Revenue Regulations sections 1.1031(j)-1(b) and contract, an employment contract, or other
Code unless otherwise noted. 1.1060-1(b)(8). similar agreements between purchaser
A partnership interest is transferred. and seller (or managers, directors,
See Regulations section 1.755-1(d) for owners, or employees of the seller).
Future
special reporting requirements. However, Consideration. The purchaser's
Developments 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
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
www.irs.gov/form8594. http://www.irs.gov/pub/irs-irbs/ liabilities. However, for determining the
irb99-06.pdf. seller's gain or loss, generally, the fair
market value of any property is treated as
General Instructions When To File being not less than any nonrecourse debt
Generally, attach Form 8594 to your to which the property is subject. Also, a
Purpose of Form income tax return for the year in which the liability that was incurred as a result of the
Both the seller and purchaser of a group of sale date occurred. acquisition of the property is disregarded
to the extent that such liability was not
assets that makes up a trade or business If the amount allocated to any asset is taken into account in determining the
must use Form 8594 to report such a sale increased or decreased after the year in basis in such property.
if goodwill or going concern value which the sale occurs, the seller and/or
attaches, or could attach, to such assets purchaser (whoever is affected) must Classes of assets. The following
and if the purchaser's basis in the assets complete Parts I and III of Form 8594 and definitions are the classifications for
is determined only by the amount paid for attach the form to the income tax return for deemed or actual asset acquisitions.
the assets. the year in which the increase or decrease Class I assets are cash and general
Form 8594 must also be filed if the is taken into account. deposit accounts (including savings and
purchaser or seller is amending an original checking accounts) other than certificates
or a previously filed supplemental Form Penalties
of deposit held in banks, savings and loan
8594 because of an increase or decrease If you do not file a correct Form 8594 by associations, and other depository
in the purchaser's cost of the assets or the the due date of your return and you cannot institutions.
amount realized by the seller. show reasonable cause, you may be
subject to penalties. See sections 6721 Class II assets are actively traded
Who Must File through 6724. personal property within the meaning of
section 1092(d)(1) and Regulations
Generally, both the purchaser and seller section 1.1092(d)-1 (determined without
must file Form 8594 and attach it to their Definitions
regard to section 1092(d)(3)). In addition,
income tax returns (Forms 1040, 1041, Trade or business. A group of assets Class II assets include certificates of
1065, 1120, 1120S, etc.) when there is a makes up a trade or business if goodwill or deposit and foreign currency even if they
transfer of a group of assets that make up going concern value could under any are not actively traded personal property.
a trade or business (defined below) and circumstances attach to such assets. A Class II assets do not include stock of
the purchaser's basis in such assets is group of assets can also qualify as a trade seller's affiliates, whether or not actively
determined wholly by the amount paid for or business if it qualifies as an active trade traded, other than actively traded stock
the assets. This applies whether the group or business under section 355 (relating to described in section 1504(a)(4). Examples
of assets constitutes a trade or business in distributions of stock in controlled of Class II assets include U.S. government
the hands of the seller, the purchaser, or corporations). securities and publicly traded stock.
both. Factors to consider in determining Class III assets are assets that the
If the purchaser or seller is a controlled whether goodwill or going concern value taxpayer marks-to-market at least annually
foreign corporation (CFC), each U.S. could attach include: for federal income tax purposes and debt
shareholder should attach Form 8594 to The presence of any section 197 or instruments (including accounts
its Form 5471. other intangible assets (provided that the receivable). However, Class III assets do
transfer of such an asset in the absence of not include:
Exceptions. You are not required to file other assets will not be a trade or Debt instruments issued by persons
Form 8594 if any of the following apply. business); related at the beginning of the day
A group of assets that makes up a trade Any excess of the total paid for the following the acquisition date to the target
or business is exchanged for like-kind assets over the aggregate book value of under section 267(b) or 707;
property in a transaction to which section the assets (other than goodwill or going Contingent debt instruments subject to
1031 applies. If section 1031 does not concern value) as shown in the Regulations sections 1.1275-4 and
apply to all the assets transferred, purchaser's financial accounting books 1.483-4, or section 988, unless the
however, Form 8594 is required for the and records; or instrument is subject to the noncontingent
part of the group of assets to which A license, a lease agreement, a bond method of Regulations section
section 1031 does not apply. For covenant not to compete, a management
information about such a transaction, see

Aug 28, 2012 Cat. No. 29292S

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1.1275-4(b) or is described in Regulations goodwill or going concern value qualifies 2. Allocate any remaining amount
section 1.988-2(b)(2)(i)(B)(2); and as a section 197 intangible). consideration to each of the following
classes (Class II, III, etc.).
Debt instruments convertible into the Allocation of consideration. An
stock of the issuer or other property. allocation of the purchase price must be The number of classes may vary
Class IV assets are stock in trade of made to determine the purchaser's basis depending on the year of the acquisition.
the taxpayer or other property of a kind in each acquired asset and the seller's Increase the amounts previously allocated
that would properly be included in the gain or loss on the transfer of each asset. to the assets in each class in proportion to
inventory of the taxpayer if on hand at the Use the residual method under sections their fair market values on the purchase
close of the taxable year, or property held 1.338-6 and 1.338-7, substituting date (do not allocate to any asset in
by the taxpayer primarily for sale to consideration for ADSP and AGUB, for the excess of fair market value).
customers in the ordinary course of its allocation of the consideration to assets If an asset has been disposed of,
trade or business. sold and asset purchased respectively. depreciated, amortized, or depleted by the
Class V assets are all assets other See Regulations section 1.1060-1(c). purchaser before the increase occurs, any
than Class I, II, III, IV, VI, and VII assets. The amount allocated to an asset, amount allocated to that asset by the
other than a Class VII asset, cannot purchaser must be properly taken into
Note. Furniture and fixtures, buildings, exceed its fair market value on the account under principles of tax law
land, vehicles, and equipment, which purchase date. The amount you can applicable when part of the cost of an
constitute all or part of a trade or business allocate to an asset also is subject to any asset (not previously reflected in its basis)
(defined earlier) are generally Class V applicable limits under the Internal is paid after the asset has been disposed
assets. Revenue Code or general principles of tax of, depreciated, amortized, or depleted.
Class VI assets are all section 197 law.
Allocation of decrease. Allocate a
intangibles (as defined in section 197) Consideration should be allocated as decrease in consideration as follows.
except goodwill and going concern value. follows.
Section 197 intangibles include: 1. Reduce the amount previously
1. Reduce the consideration by the
Workforce in place; allocated to Class VII assets.
amount of Class I assets transferred.
Business books and records, operating 2. Reduce the amount previously
systems, or any other information base, 2. Allocate the remaining allocated to Class VI assets, then to Class
process, design, pattern, know-how, consideration to Class II assets, then to V, IV, III, and II assets in that order. Within
formula, or similar item; Class III, IV, V, and VI assets in that order. each class, allocate the decrease among
Any customer-based intangible; Within each class, allocate the remaining the class assets in proportion to their fair
Any supplier-based intangible; consideration to the class assets in market values on the purchase date.
Any license, permit, or other right proportion to their fair market values on
granted by a government unit; the purchase date. You cannot decrease the amount
Any covenant not to compete entered 3. Allocate consideration to Class VII allocated to an asset below zero. If an
into in connection with the acquisition of assets. asset has a basis of zero at the time the
decrease is taken into account because it
an interest in a trade or a business; and If an asset in one of the classifications has been disposed of, depreciated,
Any franchise, trademark, or trade described above can be included in more amortized, or depleted by the purchaser
name (however, see exception below for than one class, choose the lower under section 1060, the decrease in
certain professional sports franchises). numbered class (e.g., if an asset could be consideration allocable to such asset must
See section 197 (d) for more included in Class III or IV, choose Class be properly taken into account under the
information. III). principles of tax law applicable when the
The term “section 197 intangible” does Reallocation after an increase or de cost of an asset (previously reflected in
not include any of the following: crease in consideration. If an increase basis) is reduced after the asset has been
An interest in a corporation, or decrease in consideration that must be disposed of, depreciated, amortized, or
partnership, trust, or estate; taken into account to redetermine the depleted. An asset is considered to have
Interests under certain financial seller's amount realized on the sale, or the been disposed of to the extent the
contracts; purchaser's cost basis in the assets, decrease allocated to it would reduce its
Interests in land; occurs after the purchase date, the seller basis below zero.
Certain computer software; and/or purchaser must allocate the Patents, copyrights, and similar prop
Certain separately acquired interests in increase or decrease among the assets. If erty. You must make a specific allocation
films, sound recordings, video tapes, the increase or decrease occurs in the (defined below) if an increase or decrease
books, or other similar property; same tax year as the purchase date, in consideration is the result of a
Interests under leases of tangible consider the increase or decrease to have contingency that directly relates to income
property; occurred on the purchase date. If the produced by a particular intangible asset,
Certain separately acquired rights to increase or decrease occurs after the tax such as a patent, a secret process, or a
receive tangible property or services; year of the purchase date, consider it in copyright, and the increase or decrease is
Certain separately acquired interests in the tax year in which it occurs. related only to such asset and not to other
patents or copyrights; For an increase or decrease related to assets. If the specific allocation rule does
Interests under indebtedness; a patent, copyright, etc., see Specific not apply, make an allocation of any
Professional sports franchises acquired Allocation, later. increase or decrease as you would for any
before October 23, 2004; and other assets as described under
Certain transactions costs. Allocation of increase. Allocate an Allocation of increase and Allocation of
increase in consideration as follows. decrease.
See section 197(e) for more
information. 1. Allocate the increase in Specific allocation. Limited to the fair
consideration to Class I assets.
Class VII assets are goodwill and market value of the asset, any increase or
going concern value (whether or not the decrease in consideration is allocated first
specifically to the patent, copyright, or

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similar property to which the increase or (purchaser or seller). You are required to consideration paid is the highest amount
decrease relates, and then to the other enter the TIN of the other party. If the other possible. If you cannot determine the
assets in the order described under party is an individual or sole proprietor, maximum consideration, state how the
Allocation of increase and Allocation of enter the social security number. If the consideration will be computed and the
decrease. For purposes of applying the other party is a corporation, partnership, or payment period.
fair market value limit to the patent, other entity, enter the employer
copyright, or similar property, the fair identification number. Part III—Supplemental
market value of such asset is Statement
Line 2. Enter the date on which the sale
redetermined when the increase or Complete Part III and file a new Form 8594
of the assets occurred.
decrease is taken into account by for each year that an increase or decrease
considering only the reasons for the Line 3. Enter the total consideration in consideration occurs. See Reallocation
increase or decrease. The fair market transferred for the assets. after an increase or decrease in
values of the other assets are not consideration, and When To File, earlier.
redetermined. Part II—Original Statement of
Give the reason(s) for the increase or
Assets Transferred decrease in allocation. Also, enter the tax
Line 4. For a particular class of assets, year(s) and form number with which the
Specific Instructions enter the total fair market value of all the original and any supplemental statements
For an original statement, complete Parts I assets in the class and the total allocation were filed. For example, enter “2012 Form
and II. For a Supplemental Statement, of the sales price. For Classes VI and VII, 1040.”
complete Parts I and III. enter the total fair market value of Class VI
Enter your name and taxpayer and Class VII combined, and the total
identification number (TIN) at the top of portion of the sales price allocated to
the form. Then check the box for Class VI and Class VII combined.
purchaser or seller. Line 6. This line must be completed by
the purchaser and the seller. To determine
Part I—General Information the maximum consideration to be paid,
assume that any contingencies specified
Line 1. Enter the name, address, and TIN in the agreement are met and that the
of the other party to the transaction
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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