M&A transactions: Avoid surprises from the IRS - Crawford Ellenbogen

If you’re in the process of a merger or acquisition, it’s important that both parties report the transaction to the IRS in the same way. Otherwise, you could increase your chances of being audited. If a sale involves business assets (as opposed to stock or ownership interests), the buyer and the seller must generally report the purchase price allocations that both use for specific assets. This is done by attaching IRS Form 8594 to each of their federal income tax returns. Both parties use the same allocations. Consider requiring this in your asset purchase agreement at the time of the sale. To lock in the best postacquisition results, consult with us before finalizing any transaction.