Form 8594, Asset Acquisition Statement Under Section 1060, is the form both the buyer and the seller of a business attach to their tax returns to show how the total price was split across the assets. As of October 2026, it's required when goodwill or going concern value could attach to the assets and the buyer's basis is set only by what they paid, and the price is allocated through 7 asset classes in a fixed order.
If you're selling a small business as an asset sale (not a share sale), this form decides how much of your price is ordinary income, capital gain or recapture, and how fast the buyer can write it off. It's the reason buyers and sellers argue over the allocation schedule in the purchase agreement.
Who has to file Form 8594
Generally both the buyer and the seller, attached to their income tax returns (Forms 1040, 1041, 1065, 1120, 1120-S and so on), when a group of assets that makes up a trade or business changes hands and the buyer's basis depends wholly on the price paid. It applies whether the assets are a business in the seller's hands, the buyer's, or both. If either side is a controlled foreign corporation, each U.S. shareholder attaches Form 8594 to its Form 5471 instead.
A group of assets is a trade or business if goodwill or going concern value could attach under any circumstances. The IRS lists three signs to look for:
- Section 197 or other intangible assets in the deal.
- A price above the book value of the assets (other than goodwill) in the buyer's accounts.
- A licence, lease, non-compete, management contract, employment contract or similar agreement between the buyer and seller or the seller's people.
When you don't file it
- A like-kind exchange under section 1031, except for any assets section 1031 doesn't cover.
- A transfer of a partnership interest. But if buying the interest is treated as buying the partnership's assets, the buyer files.
The 7 asset classes
| Class | What's in it | Examples |
|---|---|---|
| I | Cash and general deposit accounts | Checking and savings accounts (not certificates of deposit) |
| II | Actively traded personal property, CDs and foreign currency | U.S. Government securities, publicly traded stock |
| III | Assets marked to market at least yearly, and debt instruments | Accounts receivable |
| IV | Inventory and stock held for sale to customers | Stock in trade |
| V | Everything not in another class | Furniture, fixtures, buildings, land, vehicles, equipment |
| VI | Section 197 intangibles other than goodwill | Workforce in place, customer lists, licences, non-competes, trademarks, trade names |
| VII | Goodwill and going concern value | The residual value of the business |
How the price is allocated
- Take the total consideration and reduce it by the Class I assets (cash).
- Allocate what's left to Class II, then III, IV, V and VI in that order, never more than each asset's fair market value on the purchase date.
- Within a class, split by relative fair market value.
- Whatever remains goes to Class VII, goodwill and going concern value.
- If an asset could sit in two classes, use the lower-numbered one.
This is the residual method. Fair market value here is the gross value before mortgages, liens or other liabilities. Only Class VII can absorb more than market value, which is why goodwill ends up as the balancing figure.
Filling in the form
For the original statement you complete Parts I and II. Part I asks for the other party's name, address and taxpayer number (an SSN for an individual or sole proprietor, an EIN for an entity), the sale date and the total consideration. Part II lists the fair market value and the allocated price for each class, with Classes VI and VII combined. Line 6 asks for the maximum consideration, assuming every contingency in the agreement is met, or how it'll be worked out if you can't tell.
Earn-outs and price changes after the sale
If the price goes up or down after the sale year, whoever is affected files a supplemental Form 8594 (Parts I and III) with the return for the year the change is taken into account. An increase is allocated starting with Class I and working up. A decrease comes off Class VII first, then VI, V, IV, III and II, and no asset can go below zero. A change within the sale year is treated as happening on the purchase date.
The seller then reports the gains on the individual assets in the usual way, much of it on Form 4797 for business property and on Schedule D for capital assets. If the business is a partnership or an S corporation, the form goes with its Form 1065 or Form 1120-S. A correct Form 8594 not filed by the return due date, without reasonable cause, can bring penalties.
The verdict
Agree the allocation in the sale contract and make sure both sides file matching numbers. The IRS receives both forms, and the classes push in opposite directions: sellers usually want more in goodwill, buyers more in equipment they can write off quickly. Settle it before signing, not at tax time.
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Sellers report gains on another form, covered in our guide to reporting the sale of business property.
Frequently asked questions
Who files Form 8594?
Generally both the buyer and the seller, each attaching it to their own income tax return for the year of the sale.
When is Form 8594 required?
When a group of assets making up a trade or business is transferred, goodwill or going concern value could attach, and the buyer's basis is set only by the amount paid.
What are the 7 asset classes on Form 8594?
Class I cash, Class II traded securities and CDs, Class III receivables and marked-to-market assets, Class IV inventory, Class V other assets such as equipment and buildings, Class VI section 197 intangibles other than goodwill, and Class VII goodwill and going concern value.
Do I need Form 8594 for a share sale?
The form covers asset acquisitions. A transfer of a partnership interest is an exception, unless the purchase is treated as buying the partnership's assets, in which case the buyer files.
Is goodwill always Class VII on Form 8594?
Yes. Goodwill and going concern value are Class VII whether or not they qualify as a section 197 intangible, while other section 197 intangibles such as customer lists, licences and non-competes are Class VI.
What if the purchase price changes later?
File a supplemental Form 8594, completing Parts I and III, with the return for the year the increase or decrease is taken into account.
