Filing Form 8594 — both sides must match.

Both buyer and seller file Form 8594 separately for each asset acquisition that meets the Section 1060 "applicable asset acquisition" definition — which is essentially every agency asset purchase, for both parties. Three conditions trigger it: a transfer of assets constituting a trade or business, a buyer's basis determined wholly by the purchase price, and the residual method of allocation applying. The timing rule is simple: the form attaches to the tax-year return for the closing year, so a 2026 closing puts Form 8594 on the 2026 return filed in 2027, and an extension extends the 8594 filing with it.

§ 01 · What gets filedThe Part II requirements.

Part II of the form carries five allocation requirements: the buyer and seller names, addresses, and tax IDs; the date of sale; the total consideration; whether a non-compete, license, lease, or management contract is included; and the class-by-class fair-market-value allocation with the residual flowing to Class VII. That's the data the IRS uses to reconcile the two filings — which is exactly why a discrepancy between the buyer's numbers and the seller's numbers is so visible. The form is not a private return; it's half of a matched pair, and the IRS reads both halves together.

§ 02 · The matching problemFive sources of mismatch.

Five sources of mismatch recur: independent tax preparation by the two sides, different valuation dates, different fair-market-value methodologies (income approach versus cost approach), incomplete allocation specification in the purchase agreement, and post-closing disputes over working capital, indemnification, or earnout. Each is a way the two filings drift apart even when neither party intends to deviate — which is the whole argument for fixing the allocation contractually rather than leaving each side's tax preparer to derive it independently.

§ 03 · The coordination mechanismThe allocation exhibit.

The purchase-agreement allocation exhibit is the single most effective coordination tool. Standard contract language commits both parties to matching allocations, creates a breach-of-contract claim if one party deviates, and documents the agreed position for any subsequent dispute. With the exhibit in place, the five-step filing sequence runs cleanly: finalize the allocation schedule as a purchase-agreement exhibit at closing; within 30 days post-close, have each party's tax preparer review the allocation and confirm the 8594 draft; in the first quarter of the following year, exchange 8594 drafts for a cross-check; attach the matched forms at return filing; and on an ongoing basis, coordinate a Part III amendment for any purchase-price adjustment. The discipline is sequencing — the exhibit comes first, the drafts get cross-checked before filing, and nothing is left to chance at the return deadline.

§ 04 · The five common mistakesAnd the $2M appraisal line.

The third-party appraisal threshold is $2M: commission an appraisal for deals above that line, and document the methodology for deals below. The appraisal is cheap insurance — it supports the allocation against IRS challenge and gives both parties a common, defensible basis for their matched filings. Get the exhibit, the sequence, and the appraisal right and Form 8594 stops being an audit risk and becomes what it's meant to be — a shared record that the buyer and seller priced the same deal the same way.

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