Sole proprietor sold his business and attorney drew up the contract. Contract has a covenant not to compete clause. There is no cost breakdown in contract showing the portion of the sale price that should be applied to "covenant not to compete". On for 8594, Asset Acquisition Statement, question 6 refers to the covenant not to compete and asks for the maximum amount of consideration paid or to be paid under agreement. Taxpayer doesn't have any idea what amount should be applied and I have advised him that both the buyer and seller are required to complete form 8594 and they need to be in agreement. I also advised him to check with the attorney. How do other tax preparers handle the cost breakdown of form 8594 when taxpayers don't have a clue.
The contract does have the cost breakdown of equipment (which is a very small amount of the sale price as it is primarily a service company) so taxpayer wants to have the balance assigned to goodwill.
Any input would be greatly appreciated.
Peggy Sioux
The contract does have the cost breakdown of equipment (which is a very small amount of the sale price as it is primarily a service company) so taxpayer wants to have the balance assigned to goodwill.
Any input would be greatly appreciated.
Peggy Sioux