Instructions for Form 8594

(Rev. November 2021)

Asset Acquisition Statement Under Section 1060

Department of the Treasury

Internal Revenue Service

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

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, 1120-S, etc.) when there is a 

transfer of a group of assets that makes 

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 

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 

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 

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.

Sep 08, 2021 Cat. No. 29292S
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 tax 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 that 

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:

• 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, videotapes, 

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 assets 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 is also 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 (for example, if an asset 

could be included in Class III or IV, choose 

Class III).

Reallocation after an increase or decrease 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.

Allocation of increase. Allocate an 

increase in consideration as follows.

1. Allocate the increase in 

consideration to Class I assets.

2. Allocate any remaining amount of 

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 its 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.

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.

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

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 

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 “2021 Form 

1040.”

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.

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