GLM- Business Accounting Strategy Consulting
Connect with us
  • Home
  • Accounting & Bookkeeping
    • Bookkeeping
  • Tax
  • About
    • Consulting >
      • Strategic Succession Planning
      • Strategic Business Planning
    • Staff Accountant Needed
  • Contact
    • Matching Ideas with Resources
    • Send us a Referral
    • Networking Calendar
  • Blog & Podcast
  • Social Responsibility

Reporting the Sale of a Business

9/20/2021

 
Congratulations, Now that you sold your business, there are reports you need to fill out for the IRS. 

Form 8594 is used to report the sale and purchase of a group of assets that constitute a business. Both the purchaser and seller must file Form 8594 with their own individual income tax return.
On Form 8594, the total selling price of the business is allocated to asset classes using the residual method.
Form 8594 provides the IRS with the following information:
  • The purchaser's depreciable basis in the assets transferred, and
  • How the seller determined gain or loss.
Assets Classes on Form 8594
Form 8594 lists seven classes of assets. For asset acquisitions occurring after March 15, 2001, make the allocation among the following assets in proportion to (but not more than) their fair market value on the purchase date in the following order:

Class I assets:
  • Cash and general deposit accounts (including savings and checking accounts).
  • Does not include certificates of deposits held in banks, savings and loan associations, or other depository institutions.
Class II assets:
  • Certificates of deposit
  • U.S. government securities
  • Foreign currency
  • Publicly traded personal property, including stocks and securities.
Class III assets:
  • Accounts receivable
  • Other debt instruments
  • Assets that you mark to market at least annually for federal income tax purposes.
Class IV assets:
  • Property of a kind that would properly be included in inventory if on hand at the end of the tax year or
  • Property held by the taxpayer primarily for sale to customers in the ordinary course of business.
 Class V assets:
  • All other assets other than Class I, II, III, IV, VI, and VII assets.
  • Example of assets included in this class:
  • Furniture and fixtures, equipment, buildings, land, and vehicles.
Class VI assets:
  • Section 197 intangibles (other than goodwill and going concern value).
  • Examples include, workforce in place, customer lists, clients lists, patient lists, trademarks, trade names.
  • See the list of section 197 intangibles.
Class VII:
Goodwill:
  • Goodwill generally represents the excess of the price paid for a business over its net asset value (also called book value). It may have the following characteristics:
  • It may be associated with a company's good reputation in terms of the products it sells, the services it performs, and it's standing in the community. Other characteristics of goodwill include:
  • It may be tied to the ability of a business to continue doing business with its existing customers and to attract future customers.
  • It is an intangible asset that may only be acquired as part of the acquisition of a business.
  • It is a section 197 intangible whose value is amortized over 15 years by the purchaser of a business.
Going concern value:
  • Going-concern value is the value attributed to a business entity as an on-going enterprise.
  • Going-concern value focuses mainly on the ability of the company's assets to generate a return on investment not simply goodwill.
If an asset described in (I) through (VI) is included in more than one category, include it in the lower number category. For example, if an asset is described in both (4) and (6), include it in (4).

Comments are closed.

    GLM's Blog

    In true blog fashion, the last parts are at the top of the page. Scroll all the way down and work your way back up to read them in order. 

    Tom Gosche

    Tom is the Business Development Manager for GLM. If you are interested in learning more about GLM's services, contact him:

    630-675-8971
    [email protected]
    View my profile on LinkedIn

    Archives

    May 2025
    April 2025
    March 2025
    February 2025
    January 2025
    December 2024
    November 2024
    October 2024
    September 2024
    August 2024
    July 2024
    June 2024
    May 2024
    April 2024
    March 2024
    February 2024
    January 2024
    December 2023
    November 2023
    October 2023
    September 2023
    August 2023
    July 2023
    June 2023
    May 2023
    April 2023
    March 2023
    February 2023
    January 2023
    December 2022
    November 2022
    October 2022
    September 2022
    August 2022
    July 2022
    June 2022
    May 2022
    April 2022
    March 2022
    February 2022
    January 2022
    December 2021
    November 2021
    October 2021
    September 2021
    August 2021
    July 2021
    June 2021
    May 2021
    April 2021
    March 2021
    February 2021
    January 2021
    December 2020
    November 2020
    October 2020
    September 2020
    August 2020
    July 2020
    June 2020
    May 2020
    April 2020
    March 2020
    February 2020
    January 2020
    December 2019
    November 2019
    October 2019
    September 2019
    August 2019
    July 2019
    June 2019
    May 2019
    April 2019
    March 2019
    February 2019
    January 2019
    December 2018
    November 2018
    October 2018
    September 2018
    August 2018
    July 2018
    June 2018
    May 2018
    April 2018
    March 2018
    February 2018
    January 2018
    December 2017
    November 2017
    October 2017
    September 2017
    August 2017
    July 2017
    June 2017
    May 2017
    April 2017
    March 2017
    February 2017
    January 2017
    December 2016
    November 2016
    October 2016
    September 2016
    August 2016
    July 2016
    June 2016
    May 2016
    April 2016
    March 2016
    February 2016
    January 2016
    December 2015

    Categories

    All
    Business Growth
    Business Planning
    Business Valuation
    Buying A Business
    Covid 19 Business Help
    Covid-19 Business Help
    Expense Savings
    GLM Promotion
    Human Resources
    Matching Ideas With Resources Podcast
    Minimum Wage
    Overtime Rules
    Podcast
    Selling A Business
    Sick Time
    Steering Direction Podcast
    Succession Planning
    Tax Tips

    RSS Feed

Picture
GLM, Inc.
 
300 N. Martingale Rd., Suite 750
Schaumburg, IL 60173-2097
 
Phone: (847) 884-1781
Fax: (847) 884-1830
E-mail: [email protected]
Website: www.goglm.com 

Picture
Picture
Proudly powered by Weebly