IRS Form 8594 is used to report the allocation of purchase price in the sale of a business, outlining how the value is distributed among the assets being bought or sold. Both the buyer and the seller must file this form to ensure consistency and alignment in the tax reporting of the transaction.
The IRS Form 8594, including all information that has been agreed to or finally determined by the Accounting Firm pursuant to this Section 5.1(a), shall be referred to as the “Final Allocation.” Each of Buyer and Seller shall prepare and file all Tax Returns consistent with, and shall not take any Tax position inconsistent with, the Final Allocation, except as otherwise required by a “determination” within the meaning of Section 1313 of the Code (or applicable state or local Legal Requirement), or the execution of an IRS Form 870-AD.
Allocation of Purchase Price. Within ninety (90) days after the Closing, Purchaser will deliver a proposed draft of IRS Form 8594 to Seller allocating the Purchase Price and all other relevant items, as determined for U.S. federal income tax purposes, among the Purchased Assets (the “Purchase Price Allocation Schedule”). The Purchase Price Allocation Schedule will be prepared in accordance with Code Section 1060 and the Treasury Regulations promulgated thereunder. Purchaser and the Seller shall report, act and file all tax returns (including, but not limited to, IRS Form 8594) in all respects and for all purposes consistent with the Purchase Price Allocation Schedule. No party shall take any position for tax purposes (whether in audits, tax returns, or otherwise) that is inconsistent with such Purchase Price Allocation Schedule unless required to do so by final determination within the meaning of Section 1313(a) of the Code.
A Designation Agreement designating the “reporting person” for purposes of completing IRS Form 1099 and, if applicable, IRS Form 8594.
BUYER and SELLER acknowledge that each party may be required to report this transaction to the Internal Revenue Service (IRS) and allocate the Purchase Price among the applicable asset classifications found on IRS Form 8594.
BUYER and SELLER agree to complete, sign, and submit the appropriate IRS form 8594 for this transaction.
Seller shall have delivered to Buyer a Bill of Sale for all Purchased Assets and an IRS allocation of purchase price (IRS Form 8594).
BMC and AMI covenant and agree that (a) BMC and AMI shall file all tax returns (including, but not limited to, IRS Form 8594) consistent with the allocation above and (b) neither BMC nor AMI will take any tax position before any governmental body or in any proceeding with respect to tax that is in any way inconsistent with such allocation; provided, however, that nothing contained herein shall prevent BMC or AMI from settling any proposed tax deficiency or adjustment by any governmental body based upon or arising out of the allocation, and neither BMC nor AMI shall be required to litigate before any court any proposed tax deficiency or adjustment by any governmental body challenging such allocation
Such allocation shall be according to generally accepted accounting principles and set forth on IRS Form 8594.
The parties agree that this allocation of the Purchase Price shall be conclusive and binding, and each party hereby covenants and agrees to use such allocation for all purposes, including tax returns. Such Allocation Schedule may be attached in draft form at Closing and replaced with a final schedule within one hundred twenty (120) days after Closing. A copy of the completed IRS Form 8594 shall be executed by Asset Seller and Asset Buyer and be included in their respective tax returns.”
Purchase Price Allocation. Buyer shall prepare a draft IRS Form 8594, allocating the Option Premium, Purchase Consideration and all other relevant items, as determined for U.S. federal income Tax purposes, to the assets of the Company in accordance with the allocation methodology attached hereto as Schedule 1.10, which methodology has been mutually agreed to by the parties hereto, and which the parties agree is consistent with Code Section 1060 and the Treasury Regulations promulgated thereunder (and any similar provisions of state, local, or non-U.S. Law). Buyer shall deliver such draft IRS Form 8594 to Representative no later than [***] days after the final determination of the Purchase Consideration in accordance with this Section 1.10. Buyer shall timely file IRS Form 8594 in accordance with such draft IRS Form 8594 and the Company, and the Unitholders and Representative, shall file all other Tax Returns in a manner consistent with such draft IRS Form 8594. Neither Buyer nor any of the Unitholders shall take any position for Tax purposes (whether in audits, Tax Returns, or otherwise) that is inconsistent with such final IRS Form 8594 unless otherwise required by applicable Law, provided that the parties may use a different methodology for financial reporting purposes.
Allocation. Each Party shall independently timely file IRS Form 8594 reflecting its determination with respect to the allocation (the “Allocation”) of the Payment (and all other amounts treated as consideration for U.S. federal income tax purposes) among the assets treated as sold by the Manager to the Company for U.S. federal income tax purposes, and neither Party’s determination shall bind the other Party with respect to its determination of the Allocation. The Allocation shall be reasonable and shall be made in accordance with Section 1060 of the Internal Revenue Code of 1986, as amended. Neither Party shall be unreasonably impeded in its ability and discretion to negotiate, compromise and/or settle any tax audit, claim or similar proceedings in connection with the Allocation.
IRS Form 8594, also known as the “Asset Acquisition Statement Under Section 1060,” is used by buyers and sellers to report the purchase or sale of a group of assets constituting a trade or business. The form helps allocate the purchase/sale price among certain classes of assets.
You should use IRS Form 8594 in the following situations:
To write IRS Form 8594, follow these steps:
Gather necessary information: You will need details about the transaction, including the total selling price and the breakdown of individual asset values.
Complete the form: Fill out all applicable parts of the form:
Include the form with tax filings: Buyers attach Form 8594 to their income tax return for the tax year of the transaction, and sellers do the same, ensuring both have consistent reporting of the sale price allocation.
Example:
- Allocate the purchase price among asset classes, such as Class I: cash and general deposit accounts, Class II: actively traded personal property, and so on, until Class VII.
Contracts that involve the sale or purchase of a business often include IRS Form 8594. In particular:
In these contracts, both parties agree on how the purchase price is distributed across the assets, and this agreement is then reported using IRS Form 8594.
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