Form 8594

[Snaggletooth]

requires the valuation of up to 7 categories of assets when buying or selling a business. Assume the following:

1. Client is too old to continue running the store, wants to sell.
2. He gets appraisals for values on the asset categories.
3. Buyer doesn't trust me. Wants his own accountant.
4. Form 8594 is executed by buyer and seller with different values.

What happens if there is an extreme difference in the allocation of selling price and asset valuation??

[Jiggers]

I tell the buyer or seller, whoever is my client, that both parties need to agree to the allocation of values and to put those amounts in the buy/sell agreement.

And I don't do the appraisal for my client. I am not qualified nor licensed to do that.

[JON]

Do they not have a signed agreement??? That usually is part of the agreement and then they match. There may have to be some compromise. If absolutely will not work either the deal falls apart or it closes without agreement and the 8594s do not agree. If either gets audited, both would get looked at and your numbers (you hope) are substantiated so there is no problem.

[Roland Slugg]

It seems rather fundamental to a properly drawn buy/sell agreement that the agreement (or a separate schedule made a part thereof) should contain a breakdown and cost allocation of the assets being sold. That nails down the allocations for later entry on F-8594 ... by both buyer and seller. Yet I have seen many buy/sell agreements that contain no cost allocation ... only referring to the total selling price. In that case it is up to the buyer and seller to each make his own allocations.

I have always believed that the purpose of F-8594 was to give the IRS a way to cross-check the allocations made by the seller and the buyer of a business or group of assets. They probably don't check every one, but I'd speculate that the incidence of cross-checking is very high whenever the answers to the questions in Box 5 on F-8594 are anything other than "Yes" ... "Yes."