vom 0994 Asset Acquisition Statement OMB No. 1545-1021

Expires: 09-30-90

(uly 1988) Under Section 1060

Department of the Treasury Attachment

Internal Revenue Service > Attach to Your Federal Income Tax Return. Sequence No. 6
Name as shown on return Identification number as shown on tax return

To Be Completed by All Filers
1 Name of buyer Buyer's identification number as shown on tax return

Address (number and street)

City, state, and ZIP code

2 Name of seller Seller's identification number as shown on tax return

Address (number and street)

City, state, and ZIP code

3 Date of sale 4 Total sales price

| Part If Assets Transferred—To be completed by all filers of an original statement

1 Assets Aggregate Fair Market Value (Actual Amount for Class |) Allocation of Sales Price
Class | $

Class II $

Class Ill $

Total

2. Did the buyer and seller provide fe for an allocation of the sales price in the sales contract or in another written document

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signed by both parties?. . . oo rn oe rn . . . Yes) No
If “Yes,” are the aggregate fair market values sisted for each of asset Classes |, II, and I!l the amounts agreed upon in
your sales contract or ina separate writtendocument?. . . . . . . 7 ee ee ee woe . . Yes) Nol]

3 To be completed by buyer only: In connection with the purchase of the group of assets, did you also purchase a license
or a covenant not to compete, or enter into a lease agreement, employment contract, management contract, or similar
arrangement with the seller (or managers, directors, owners, or employees of the seller)? . . . . . - YesC) No)

If “Yes,” specify (a) the type of agreement, and (b) the maximum amount of consideration (not including interest) paid
orto be paid under the agreement. (Attach additional sheets if more space is needed.)

GUE Class Ill, Intangible Amortizable Assets Only—Complete if applicable. The amounts shown below also must
be included under Class I! assets in Part II. (Attach additional sheets if more space is needed.)
Assets Fair Market Value Useful Life Allocation of Sales Price
$ $
$ $

$ $
[zuakg Supplemental Statement—To be completed only if amending an original statement or previously filed

supplemental statement because of an increase or decrease in consideration. _..
1__ Assets Allocation of Sales Price as Previously Reported Increase or (Decrease) Redetermined Allocation of Sales Price
Class |
Class Il
Class tl
Class IV
Total

2__Reason(s) for increase or decrease (Attach additional sheets if more space is needed.)

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3 Tax year and tax return form number with which the original Form 8594 and any supplemental statements were filed

For Paperwork Reduction Act Notice, see instructions. Form 8594 (7-88)


Form 8594 (7-88)

Page 2

Instructions

(Section references are to the Internal Revenue
Code, unless otherwise noted.)

Paperwork Reduction Act Notice.—We ask for
this information to carry out the Internal Revenue
laws of the United States. We need it to ensure that
taxpayers are complying with these laws and to
allow us to figure and collect the right amount of
tax. You are required to give us this information.

The estimated average time needed to complete
this form, depending on individual circumstances,
is 1.1 hours. If you have comments concerning the
accuracy of this time estimate or suggestions for
making this form more simple, we would be happy
to hear from you. You can write either IRS or the
Office of Management and Budget at the
addresses listed in the instructions of the tax
return with which this form is filed.

Purpose of Form.—For acquisitions after May 6,
1986, the seller and buyer of a group of assets
constituting a trade or business must report to IRS
on Form 8594 if goodwill or a going concern value
attaches, or could attach, to such assets and if the
buyer's basis in the assets is determined only by
the amount paid for the assets (“applicable asset
acquisition,” defined below).

Who Must File.—Both the buyer and the seller of
the assets must prepare and attach Form 8594 to
their Federal income tax returns (Forms 1040,
1041, 1065, 1120, 1120S, etc.).

Exceptions.—You are not required to file Form
8594 if any of the following apply:

(1) The acquisition is not an applicable asset
acquisition.

(2) The asset acquisition occurs pursuant toa
binding contract in effect on May 6, 1986, and at
all times thereafter.

(3) A group of assets that constitutes a trade or
business is exchanged for like-kind property ina
transaction to which section 1031 applies.
However, if section 1031 does not apply to all the
assets transferred, 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 section 1.1060-
1T(b)(4).

(4) A partnership interest is transferred. See
Regulations section 1.755-2T for special reporting
requirements.

When To File.—Generally, attach Form 8594 to
your Federal income tax return for the year in
which the sale date occurred. If the amount
allocated to any asset is increased or decreased
after Form 8594 is filed, the seller and/or buyer
(whoever is affected) must complete Part | and the
supplemental statement in Part IV of anew Form
8594 and attach the form to the Federal tax return
for the year in which the increase or decrease is
taken into account.

Exception, —If the sale (or increase or
decrease) is in a taxable year for which the due
date (including extensions of time) of the return is
before September 13, 1988, you need not file
Form 8594 for that event. For example, if a
reportable sale, or an increase or decrease,
occurred in 1987 and you filed your 1987 Form
1040 by April 15, 1988, you need not file Form
8594 for that event. But if the due date of your
1987 Form 1040 is extended to September 15,
1988, Form 8594 must be attached to that return.
Definitions
Applicable asset acquisition means a transfer of
a group of assets that constitutes a trade or
business in which the buyer's basis in such assets
is determined wholly by the amount paid for the
assets. An applicable asset acquisition includes
both a direct and indirect transfer of a group of
assets, such as a sale of a business.

Agroup of assets constitutes a trade or
business if goodwill or going concern value could
under any circumstances attach to such assets. A
group of assets could qualify as a trade or business
whether or not they qualify as an active trade or
business under section 355 (relating to controlled
corporations). Factors to consider in making this
determination include (a) any excess of the total
paid for the assets over the aggregate book value

of the assets (other than goodwill and going
concern value) as shown in the buyer's financial
accounting books and records, or (b) a license, a
lease agreement, a covenant not to compete, a
management contract, an employment contract,
or other similar agreements between buyer and
seller (or managers, directors, owners, or
employees of the seller).

The buyer's consideration is the cost of the
assets. The seller's consideration is the amount
realized.

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 not less than any nonrecourse
debt to which the property is subject.

Class | assets are cash, demand deposits, and
similar accounts in banks, savings and loan
associations and other depository institutions, and
other similar items that may be designated in ‘the
Internal Revenue Bulletin.

Class Il assets are certificates of deposit, U.S.
Government securities, readily marketable stock
or securities, foreign currency, and other items
that may be designated in the Internal Revenue
Bulletin.

Class III assets are all tangible and intangible
assets that are not Class I, Il, or IV assets.
Examples of Class Ill assets are furniture and
fixtures, land, buildings, equipment, a covenant
not to compete, and accounts receivable.

Class IV assets are intangible assets in the nature
of goodwill and going concern value

Allocation of Consideration

An allocation of the purchase price must be made
to determine the buyer's basis in each acquired
asset and the seller's gain or loss on the transfer
of each asset. Use the residual method for the
allocation of the sales price among the goodwill
and other assets transferred. See Regulations
section 1,1060-1T(d). The amount allocated to
an asset, other than a Class IV asset, cannot
exceed its fair market value on the purchase
date. The amount you can allocate to an asset
also is subject to any applicable limits under the
Internal Revenue Code or general principles of
tax law. For example, see section 1056 for'the
basis limitation for player contracts transferred in
connection with the sale of a franchise.

First, reduce the consideration by the amount
of Class | assets transferred. Next, allocate the
remaining consideration to Class Il assets in
proportion to their fair market values on the
purchase date, then to Class Ill assets in
proportion to their fair market values on the
purchase date, and finally to Class IV assets.

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 buyer's
cost basis in the assets occurs after the purchase
date, the seller and/or the buyer 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.

For an increase or decrease related to a patent,
copyright, etc., follow the rules under Specific
allocation, described below.

Allocation of Increase.—Allocate an increase in
consideration as described above under
Allocation of Consideration. \f an asset has been
disposed of, depreciated, amortized, or depleted
by the buyer before the increase occurs, any
amount allocated to such asset by the buyer 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
the following order: (1) reduce the amount
previously allocated to Class IV assets, (2) reduce
the amount previously allocated to Class Ill assets
in proportion to their fair market values on the
purchase date, and (3) reduce the amount
previously allocated to Class Il 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 buyer, the decrease
in consideration allocable to such asset must be
properly taken into account under 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.
Patents, Copyrights, and Similar Property.—
You must make a specific allocation if an
increase or decrease is the result of a
contingency that directly relates to income
produced by a particular intangible asset, such as
a patent, a secret process, or a copyright, and the
increase or decrease is related only to such asset
and not to other assets. If the specific allocation
rule does not apply, make an allocation of any
increase or decrease as you would for any other
assets as described above under Allocation of
Increase and Allocation of Decrease.

Specific allocation. —Limited to the fair market
value of the asset, any increase or decrease is
allocated first specifically to the patent, copyright,
or similar property to which the increase or
decrease relates, and then to the other assets in
the order described above under Allocation of
Increase and Allocation of Decrease. For purposes
of applying the fair market value limit to the
patent, copyright, or similar property, the fair
market value of such asset is redetermined when
the increase or decrease is taken into account by
considering only the reasons for the increase or
decrease. However, the fair market values of the
other assets are not redetermined.

Specific Instructions

For an original statement, complete Parts |, Il, and,
if applicable, Ill. For a Supplemental Statement,
complete Parts | and IV.

Part |, Identification number as shown on tax
return.—You are required to provide your
taxpayer identification number (TIN) and the TIN
of the other person (buyer or selier) who entered
into this transaction. For an individual or sole
proprietor, enter the social security number. For a
corporation, partnership, or other entity, enter the
employer identification number.

Part I, Item 3.—Enter the date on which the sale
of the assets occurs.

Part I, Item 4.—Enter the total consideration
transferred for the assets.

Part Il.—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 item
3, 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 {11.—Enter in Part Ill only those Class Il!
assets that are intangible and amortizable. Be sure
to enter the total Class Ill assets in Part Il.

Part IV.—Complete Part IV and file a new Form
8594 for each year that an increase or decrease
in consideration occurs. Give the reason(s) for
the increase or decrease in allocation. Also, enter
the form number and tax year with which the
original and any supplemental statements were
filed. For example, enter “1987 Form 1040." If
an original or supplemental Form 8594 was not
required to be filed, so state.

U.S. coverewsarT PRINTING CPFICE 1988/526-U67/85026