Form 8594

[Oh Baby!]

Is anyone familiar with this form?

I've clearly never seen this one before so I have to ask (maybe I'll seem naive). What is the ramification of how this form is completed? From reading the instructions, it appears that as long as the buyer and seller agree on an allocation, then all is good? is there something that I should be aware of or be looking out for?

(In my case, the seller seems to want to allocate a large portion to goodwill which is fine with the buyer (my client)).

[bay]

Is anyone familiar with this form?

I've clearly never seen this one before so I have to ask (maybe I'll seem naive). What is the ramification of how this form is completed? From reading the instructions, it appears that as long as the buyer and seller agree on an allocation, then all is good? is there something that I should be aware of or be looking out for?

(In my case, the seller seems to want to allocate a large portion to goodwill which is fine with the buyer (my client)).

Last year I had to file this form twice for a client - first you need to look to the purchase agreement to see how the price should be allocated among the assets. It is important that the filing of this form be cordinated between the buyer and the seller because the IRS matches up this information. About 4 years ago I completed this form for a client who sold a business. I used the numbers per the purchase agreement. Well the buyer did not properly complete the form and both parties where subsequently audited by the IRS. My client came out clean (no changes) but the buyer was not so lucky. When I have a client being audited, I always ask the agent what prompted the audited. This agent told me it was the sale of assets that triggerd the audit.

This is another important reason to remind your clients that when buying, or selling a business that they should consult you the tax advisor before closing on a deal.

Anyhow I have some more returns to finish up so good luck

[Burke]

Is anyone familiar with this form?

I've clearly never seen this one before so I have to ask (maybe I'll seem naive). What is the ramification of how this form is completed? From reading the instructions, it appears that as long as the buyer and seller agree on an allocation, then all is good? is there something that I should be aware of or be looking out for?

(In my case, the seller seems to want to allocate a large portion to goodwill which is fine with the buyer (my client)).

Both buyer and seller are supposed to attach this form to their respective tax returns in the year of sale. They need to match. The seller wants to allocate a large portion to goodwill since that will be treated as long-term capital gains (Sche D) on his tax return. The buyer will treat it as a depreciable asset over 15 years. However, they should have had a written sale agreement of some kind (to cover both of them) which specifies this and the other allocations of the sale price, like values assigned to fixed assets, including any covenant not to compete, which is treated differently for tax purposes.