Instructions for Filling Out Form 8594

This document is a comprehensive guide from the IRS, designed to assist individuals in accurately completing Form 8594, which is used to report the sale of a group of assets constituting a trade or business. The guide includes term definitions, step-by-step instructions, and information on penalties for incorrect filing.

In this article, we'll provide insights on Form 8594 and a step-by-step guide on how to fill it out, keeping the information concise and to the point.

What is Form 8594?

Form 8594 is a document used by both the seller and purchaser of a group of assets that constitute a trade or business. This form is required when goodwill or going concern value is attached, or could be attached, to the assets, and the purchaser's basis in the assets is determined solely by the amount paid for them.

The primary purpose of Form 8594 is to report the sale of these assets and to file amendments if there are any increases or decreases in the purchaser's cost of the assets or the amount realized by the seller. The form consists of three main parts: general information of the parties involved, the original statement of assets transferred, and a supplemental statement for each year an increase or decrease in consideration occurs.

Who Must File Form 8594?

Both the seller and purchaser of a group of assets that make up a trade or business need to file Form 8594. This requirement applies when there is a transfer of a group of assets that constitute a trade or business, and the purchaser's basis in these assets is determined solely by the amount paid for them. This is applicable 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.

Form 8594 Tax Filing Deadlines and Due Dates

• Form 8594 should generally be attached to the income tax return for the year in which the sale of the assets occurred.
• If the amount allocated to any asset is increased or decreased after the year in which the sale occurs, the form should be completed and attached to the income tax return for the year in which the increase or decrease is taken into account.

Form 8594 Late Payment Penalty

Although the late payment penalty for Form 8594 is not explicitly mentioned in the instructions, it is important to note that penalties may be imposed under sections 6721 through 6724 of the Internal Revenue Code if the form is not filed correctly by the due date and reasonable cause cannot be shown.

Step-by-Step Instructions for Form 8594

Step by step instructions for filling out Form 8594:

1. Enter your name and taxpayer identification number (TIN) at the top of the form. Then check the box for Purchaser or Seller.
2. For an original statement, complete Parts I and II. For a Supplemental Statement, complete Parts I and III.
3. In Part I—General Information, enter the name, address, and TIN of the other party to the transaction (purchaser or seller). Enter the date on which the sale of the assets occurred. Enter the total consideration transferred for the assets.
4. In Part II—Original Statement of Assets Transferred, 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.
5. In Part III—Supplemental Statement, complete this part 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 tax year(s) and form number with which the original and any Supplemental Statements were filed.

How to Submit Form 8594

To submit Form 8594, complete the form by filling out the required sections, including your name, taxpayer identification number (TIN), and information about the other party involved in the transaction. Attach Form 8594 to your income tax return for the year in which the sale of the assets occurred. If there is an increase or decrease in the amount allocated to any asset after the sale year, complete the necessary sections and attach the form to the income tax return for the year in which the change is taken into account.

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