Form 8594 required?

[ritastone001]

Client( LLC)  sold a garbage route. The only assets sold were dumpsters in use by customers. The client built the route over the past 7 years. The sale was to a large garbage company. (I do have a call into them). Will Form 8594 be required?  This is a rural area, 1 service provider is normally what is available, so is goodwill even a consideration in the sale?  My client tells me there were no agreed on prices for anything except the total for the "route".  Opinions please, if anyone has the time to respond.

[jeffmcpa2010 · Accepted solution]

I would probably find out what the dumpster's would have sold for individually, or what it would have cost to purchase replacements, and treat anything else as good will.

You should be able to make the case that the portion of the sale that's 1245 property would not exceed the replacement cost of the dumpsters, possibly even discounted some depending on condition.

On the other hand...is there any tax difference to treat it as if all you sold was the equipment? Check and see and if not, don't drive yourself crazy.

I think I have maybe filed an actual form 8594 use once or twice, but I can't actually remember when I did it.

[ritastone001]

Thanks for your response. And sorry to take so long to reply. As normal there is more to the story. I now have print outs with everything listed. I am down to entering the Goodwill & Noncompete amounts. Researching date of acquisition for the goodwill. l seem to remember it is the date of sale. Which would make the gain short term. 

Again thank you for taking time to answer my question.

[jeffmcpa2010]

I think goodwill is created over the entire time that he owned the business (Plus he may have purchased some if he purchased the business, but it sounds as though he started the business). I suppose an argument could be made that a portion of the goodwill was created in the final year of ownership, which could create some short term gain.

I don't recall seeing goodwill gain ever treated as anything other than Long Term Capital Gain.

[ritastone001]

In the updated paperwork, he did purchase 2 routes in 2017, so goodwill would have been obtained. So yes it will be long term gain. I can't remember where the date of sale would be the same as acquisition date. So I am going with long term. As I believe that is the correct entry.  Thanks again.

[Terry53029]

This is what the irs instruction says about form 8594 

"Who Must File
Generally, both the purchaser and seller
must file Form 8594 and attach it to their
income tax returns (Forms 1040, 1041,
1065, 1120, 1120-S, etc.) when there is a
transfer of a group of assets that makes
up a trade or business (defined below)
and the purchaser's basis in such assets
is determined wholly by the amount paid
for the assets. This applies whether the
group of assets constitutes a trade or
business in the hands of the seller, the
purchaser, or both."

[ritastone001]

Yes I have read and printed a copy of the instructions to my file. Thank you.