Asset Acquisition STATEMENT

OVERVIEW 8594

Per Form 8594 instructions, 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. Each seller and buyer will allocate assets acquired/sold between seven asset categories. Such allocations can be tricky and because buyer’s interest is generally adverse from sellers. This could potentially trigger mismatch between how much buyer allocates to a certain asset category and reports it on Form 8594 versus how much seller allocated to that same category and reported on that form

OUR SERVICES AND WHAT WE CAN HELP WITH

1. Understanding Form 8594

Purpose: Explain that Form 8594 is used to report the purchase or sale of a business or substantial assets and is essential for determining how the transaction is taxed.
Types of Transactions: Identify transactions that require Form 8594, including asset sales, mergers, and acquisitions.

2. Preparation and Filing

Completing the Form: Assist clients in accurately completing Form 8594, ensuring all required information is reported, such as the allocation of the purchase price to various asset classes.
Filing Requirements: Explain the filing deadlines and requirements for both buyers and sellers, ensuring compliance with IRS regulations.

3. Allocation of Purchase Price

Asset Classes: Help clients understand the different asset classes outlined in the form, including goodwill, inventory, and tangible assets.
Negotiating Purchase Price Allocation: Advise clients on how to negotiate the allocation of the purchase price among various assets to minimize tax liabilities and maximize benefits.

4. Tax Implications

Consequences of Asset Sales: Educate clients about the tax consequences of asset sales, including ordinary income, capital gains, and the impact on depreciation recapture.
Impact on Tax Basis: Discuss how the allocation affects the tax basis of the assets for both the buyer and seller, influencing future tax implications.

5. Compliance with Section 1060

Section 1060 Regulations: Provide guidance on compliance with Section 1060, which governs the treatment of certain asset acquisitions and requires the use of Form 8594 when assets are sold as part of a business.
Common Mistakes: Identify common mistakes made in filing Form 8594 and how to avoid them, ensuring clients are well-informed.

6. Post-Acquisition Considerations

Asset Depreciation and Amortization: Advise on how to handle the depreciation or amortization of acquired assets based on the allocation reported on Form 8594.
Impact on Future Transactions: Discuss how the allocation of purchase price and the information reported on Form 8594 will affect future tax returns and potential asset sales.

7. Audit Representation

Representation during IRS Audits: Provide representation for clients during IRS audits related to asset acquisitions, ensuring that the treatment of the transaction aligns with IRS regulations.
Responding to Inquiries: Assist clients in responding to IRS inquiries regarding the filing of Form 8594 or related issues.

8. Cross-Border Transactions

International Considerations: If applicable, help clients navigate the complexities of cross-border transactions, including the impact of foreign asset transfers and compliance with U.S. tax laws.

REPORTING

Form 8594 may need to be attached to your income tax return (Forms 1040, 1041, 1065, 1120, 1120S, etc.), and compliance may become more complicated when US shareholders have to attach 8594 to 5471 informational tax return if buyer or seller is a CFC (controlled foreign corporation).

tax law is complex. tax attorney will aim to find solutions.