Farm 8594 (Rev. 7-90)

Page 4

Allocation of Decrease.—Allocate a
decrease in the following order: (1) reduce
the amount previously allocated to Class lV
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 spacific 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 |,
tl, and, if applicable, Ill. For a Supplemental
Statement, complete Parts | and IV

Enter your name and taxpayer
identification number (TIN) at the top of the
form. Then identify yourself as the buyer or
seller by checking the proper box.

Part I, Item 1.—Enter the name, address,
and TIN of the other party to the transaction
(buyer 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
acorporation, partnership, or other entity,
enter the employer identification number

Part |, Item 2.—Enter the date on which
the sale of the assets occurred.

Part I, Item 3.—Enter the total
consideration transferred tor the assets.
Part l.—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 IIl.—Enter in Part Il) only those Class
lll assets that are intangible and
amortizable. Be sure to enter the total Class
Ml assets in Part Il.

Part 1V.—Complete Part IV and file a new
Form 8594 for each year that an increase or
decrease in consideration occurred, Give
the reason(s) for the increase or decrease in
allocation. Also, enter the tax year and form
number with which the original and any
supplemental statements were filed. For
example, enter 1988 Form 1040. If an
original or supplemental Form 8594 was
not required to be filed, so state.

74S. Government Franting Offaee  1990+262-L51 /00! 16


com 85 94 Asset Acquisition Statement OMB No. 1545-1021

Expires: 4-30-93
(Rey. July 1990) Under Section 1060
Department of the Treasury Attachment
internal Revenue Service > Attach to your Federal income tax return. Sequence No. 61
Name as shown on return Identification number as shown on return
Check the box that identifies you: CT Buyer O setter

[Mal General Information—To be completed by all filers

1 Name of other party to the transaction Other party's identification number

Address (number and street)

City, state, and ZIP. code

2 Date of sale 3 Total sales price

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

1__ Assets Aggregate Fair Market Value (Actual Amount for Class I) Allocation of Sales Price
Class! $ _ $
Class Il $ $
Class tlt $ $
Class IV $
Total ZF $

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

signed by both parties?. . 2... Yes no
If “Yes,” are the aggregate fair market values listed stor each \of asset Classes |, 1, Ul, and Ill the amounts aged upon in
your sales contract or in a separate written document? . . _ Loe a . . . . Yesl) 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)? . ~» YesO) nol]
If “Yes," specify (a) the type of agreement, and (b) the maximum amount of consideration (not includi ng interest) paid or
to be paid under the agreement. (Attach additional sheets if more space is needed.)

For Paperwork Reduction Act Notice, see instructions. Form 8594 (Rev. 7.90)


Form 8594 (Rev. 7-90)

Page 2

Class Ill, Intangible Amortizable Assets Only—~ Complete if applicable. The amounts shown below also must
be included under Class II assets in Part II, (Attach additional sheets if more space is needed.)

Assets Fair Market Value Useful Life Allocation of Sales Price
_ _ L$ $ _

is $
$ $

$ $ -
$ $
{8 $
$ $
$ $
Is :

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 It $ $ $
Class Ill $ $ $
Class IV $ $ $
Total $ $

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

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



Form 8594 (Rev. 7-90)

Page 3

Instructions

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

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 this
information. 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.

The time needed to complete and file this
form will vary depending on individual
circumstances. The estimated average time
is:

Recordkeeping . 10 hrs., 46 mins.

Learning about the

laworthe form . 30 mins.
Preparing and sending
theformtoIRS. . . 42 mins.

If you have comments concerning the
accuracy of these time estimates or
suggestions for making this form more
simple, we would be happy to hear from
you. You can write to both IRS and 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.—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,
11208, 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 under a
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 in a 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.
Penalty.—If you fail to file a correct Form
8594 by the due date of your return and you
cannot show reasonable cause, you may be
subject to a penalty. See sections 6721
through 6724,

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,

A group 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 I! 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 II! assets are all tangible and
intangible assets that are not Class |, Il, or
IV assets. Examples of Class Ill assets are
furniture and fixtures, |and, 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 lV 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 lil 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 on
page 4.

Allocation of Increase.—Allocate an
increase in consideration as described
above under Allocation of Consideration. If
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.