Use Form 8594. Read the instructions to the form to address any uncertainty Targ

Question

Use Form 8594. Read the instructions to the form to address any uncertainty Target Corporation's assets are acquired by Acquiring Corporation in exchange for $7,200,000 of cash to be paid to Target Corporation. The purchase agreement is dated March 11, 2018. Target Corporation's EIN is 23-372698674. Target Corporation's address is 3245 Industrial Blvd., Plando, Texas, 75032, YOU REPRESENT ACQUIRING (THE BUYER) AND WILL REPORT THE FORM ON BEHALF OF THE BUYER Acquiring Corporation's EIN is 23-900653890. Acquiring Corporation's address is 9200 Bretton Lakes Rd., Nashville, TN, 37209. The contract lists the following assets and values assigned by the parties. The parties have agreed that they will follow the purchase price allocation as stated in the contract. Before the anticipated April 18, 2018 close of this sale, both buyer and seller have agreed to prepare sample Form 8594 forms so each party can review the other's understanding of the clause in the agreement that requires consistency in eporting. You are preparing a draft Form 8594 for this purpose.

Explanation / Answer

Purchase consideration of which target company to acquiring company is $ 7,200,000 in cash

Buying and selling a Business: Form 8594, Asset acquisition statement

The Form 8594 allocates the entire purchase/sale of the business into the various classes of assets; both the buyer and the seller are required to file the form with their tax returns. It is also very important that allocations be spelled out in the sale/purchased agreement and the treatment be consistent between the buyer and seller.

Generally assets are classified into seven caegories given below

Target corporation assets as per thier contract list with acquiring corporation as per form 8594

57,70,000

Since acquiring company incurred liquidation expenses of $1,40,000, so this not effect to target company as it is fully born by acquiring company, Provided the acquirng company may create this as capital reserve / charge such expenditure to goodwill account if any.

Class of Assests Amount(FMV) Class-1 Cash- 1,50,000 Class-3 Accounts receivable - 3,40,000 Class-4 Inventory- 8,10,000 Class-5 Equipments+Furnishings+Land+Building=38,50,000 Class-6 Workforce in place+Customer list+Copy rights=6,20,000 Total

57,70,000

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