Post by Sapphire Capital on May 23, 2014 1:43:22 GMT 4
The US tax law requires both the seller and purchaser of a group of assets that makes up a trade or business to file IRS Form 8594 to report the sale if:
1. Goodwill or going concern value attaches, or could attach, to such assets.
2. The purchaser’s basis in the assets is determined only by the amount paid for the assets. In other words no other substantiation of market value …
From experience:
1. Many practitioners are failing to file IRS Form 8594 (http://www.irs.gov/pub/irs-pdf/f8594.pdf) which can prove most crucial three or even six years from today. Form 8594 is substantial in assessing the quality of your tax prep services.
2. IRS Form 8594 can and should be amended if corrections are needed. All parties involved in a transaction of business assets should agree to exactly how this form is prepared as part of the transaction.
Both the purchaser and seller must file Form 8594 and attach it to their income tax returns (Forms 1040, 1041, 1065, 1120, 1120S, etc.) when there is a transfer of a group of assets that make up a trade or business and the purchaser’s basis in such assets is determined wholly by the amount paid for the assets.
If the purchaser or seller is a controlled foreign corporation (CFC), each U.S. shareholder has to attach Form 8594 to its Form 5471 (http://www.irs.gov/pub/irs-pdf/f5471.pdf).
There are 2 exceptions to the filing requirement
1. 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 Form 8594 is required for the part of the group of assets to that section 1031 does not apply. For information about such a transaction, see Regulations sections 1.1031(j)-1(b) [http://www.law.cornell.edu/cfr/text/26/1.1031%28j%29-1] and 1.1060-1(b)(8) [http://www.law.cornell.edu/cfr/text/26/1.1060-1].
2. 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. [http://www.irs.gov/pub/irs-irbs/irb99-06.pdf]
1. Goodwill or going concern value attaches, or could attach, to such assets.
2. The purchaser’s basis in the assets is determined only by the amount paid for the assets. In other words no other substantiation of market value …
From experience:
1. Many practitioners are failing to file IRS Form 8594 (http://www.irs.gov/pub/irs-pdf/f8594.pdf) which can prove most crucial three or even six years from today. Form 8594 is substantial in assessing the quality of your tax prep services.
2. IRS Form 8594 can and should be amended if corrections are needed. All parties involved in a transaction of business assets should agree to exactly how this form is prepared as part of the transaction.
Both the purchaser and seller must file Form 8594 and attach it to their income tax returns (Forms 1040, 1041, 1065, 1120, 1120S, etc.) when there is a transfer of a group of assets that make up a trade or business and the purchaser’s basis in such assets is determined wholly by the amount paid for the assets.
If the purchaser or seller is a controlled foreign corporation (CFC), each U.S. shareholder has to attach Form 8594 to its Form 5471 (http://www.irs.gov/pub/irs-pdf/f5471.pdf).
There are 2 exceptions to the filing requirement
1. 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 Form 8594 is required for the part of the group of assets to that section 1031 does not apply. For information about such a transaction, see Regulations sections 1.1031(j)-1(b) [http://www.law.cornell.edu/cfr/text/26/1.1031%28j%29-1] and 1.1060-1(b)(8) [http://www.law.cornell.edu/cfr/text/26/1.1060-1].
2. 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. [http://www.irs.gov/pub/irs-irbs/irb99-06.pdf]