How do I report a Bulk sale of a Business?
Per the requirements of IRS Regulation section 1.1060-1 (e)(1)(ii) and code section 338, the buyer and the seller in an applicable asset acquisition, must "each report on Form 8594 the amount of consideration in the transaction and specific information about the allocation of consideration among the assets transferred."
The seller and the buyer of a group of assets that make up a trade or business are required to file Form 8594 to report such sales if goodwill or going concern value attaches to, or could attach to, the assets sold or transferred and if the buyer's basis in the assets is determined only by the amount paid for the assets.
The IRS requires both the buyer and the seller of the assets to include this form to their Individual Federal Income Tax Return. The IRS Form 8594 would be attached to the Federal Income Tax Return for the year in which the sale occurred.
The information that is necessary on Form 8594 includes the following:
1. The name, address, and taxpayer identification number of the buyer and the seller.
2. The purchase date.
3. The total consideration for the assets.
4. The amount of consideration allocated to each class of assets and the aggregate fair market value of assets in each class.
5. A statement as to whether the buyer and seller agreed upon the fair market value of the assets in the contract of sale.
6. The useful life of each class III intangible and amortizable asset. (Class III assets are all tangible and non-tangible assets. Examples of class III assets include furniture and fixtures, land, buildings, equipment, and accounts receivable.)
7. A statement as to whether, in connection with the acquisition of the group of assets, the buyer also obtained a license, a covenant not to compete, or entered into a lease agreement, an employment contract, a management contract, or similar arrangement between the buyer and the seller (or the managers, directors, owners, or employees of the seller).