J.K. Lasser's Small Business Taxes 2013: Your Complete Guide to a Better Bottom Line

Sale of All the Assets of the Business

If you sell your business by selling all of its assets, the rules for reporting gain or loss are really no different from a single asset sale. You allocate the purchase price of the sale to each of the assets, including goodwill or going concern value, in order to determine your gain or loss. You usually arrive at this allocation through negotiations between you and the buyer.

Asset classes reported on Form 8594, Asset Acquisition Under Section 1060, include the following:

• Class I assets—Cash, and savings and checking accounts.
• Class II assets—Certificates of deposit, government securities, publicly-traded stock or securities, and foreign currency.
• Class III assets—Mark-to-market assets.
• Class IV assets—Stock in trade and inventory.
• Class V assets—All assets that do not fall within another class. Furniture and fixtures, buildings, land, vehicles, and equipment generally fall within this class.
• Class VI assets—Section 197 assets (other than goodwill and going concern value) such as patents, copyrights, licenses, permits, franchises, trademarks, and covenants not to compete. (Section 197 assets are discussed in Chapter 14.)
• Class VII assets—Goodwill and going concern value.

The sale price is allocated in descending order—first to Class I assets, then Class II assets, and so on. There is no debate on allocating part of the purchase price to assets in the first 2 classes since the value of the assets is not in dispute. But as a seller, you generally ...