Reconcile buyer and seller information before Form 8594

Form 8594 reports specified acquisitions of a group of assets constituting a trade or business. The IRS instructions generally require both purchaser and seller to file when the applicable conditions are met. Ask each party's tax adviser to confirm the transaction's treatment before turning the purchase agreement's allocation table into a return attachment.

An equity transaction and an asset acquisition can require different analysis, including exceptions described in the instructions. Preserve the legal structure, any relevant elections and the adviser's scope conclusion. The financial-reporting purchase price allocation should remain a separate workpaper because its measurements and categories need not match the tax statement.

Start with the executed purchase agreement and closing statement. Show the headline price, closing adjustments, deferred amounts and contingent consideration in separate rows. Connect cash payments to settlement evidence, then ask the preparer to identify the purchaser's cost and the seller's amount realized under the applicable tax rules.

Record transaction costs, assumed obligations and payments under employment or noncompetition arrangements separately for review. Their inclusion in the same closing wire does not establish their classification. Give the advisers the relevant agreements in full so a payment's conditions can be assessed rather than inferred from its bank description.

Use a differences column when the parties' proposed figures disagree. Identify whether the issue concerns timing, classification or a factual omission. Do not force agreement by changing a schedule without its preparer's approval. Preserve the correspondence resolving each difference.

Map the acquired assets to the classes used by Form 8594 and retain the valuation support. The instructions prescribe the allocation process and the information reported for each class. Ask the tax reviewer to determine the classification of intangibles and goodwill; a broad accounting account called acquisition assets is insufficient support.

Compare the proposed statement with the agreement's allocation provisions. Identify the date and version of any written allocation agreement, and ask counsel about the parties' obligations to report consistently. Keep an unresolved position visible until the responsible advisers decide how it should be reported.

For an illustrative purchase, equipment, customer relationships and goodwill can appear in different tax categories even when management discusses them as a single business value. The working schedule should identify the assets and the preparer's classification rationale. A mathematical tie to total consideration does not validate the categories by itself.

Monitor earnouts, working-capital settlements and other adjustments after the original return. The Form 8594 instructions require supplemental reporting when a later increase or decrease in consideration affects the applicable allocation. Give the preparer the settlement date, calculation and payment evidence so the reporting year can be determined.

Maintain the original allocation and show each later change as a separate layer. Identify affected asset classes and retain the reason for the change. This allows the reviewer to follow the cumulative allocation without confusing the original purchase price with the amount reported in a later year.

Archive each filed Form 8594 with the tax return to which it was attached. Record any supplemental statement still expected from a contingent payment and the person monitoring it after the deal team disbands.