Form 8594 Question

[NewbieAcctant]

Hello Everyone! Hopefully simple question here about the Form 8594. I have a doctor's practice (C Corp - Single shareholder) who is selling to another to another practice. On the purchase agreement there is an allocation of the sales price to the various classes of assets. For "Personal Goodwill" & "Covenant not to Compete"  Do I include these on the corporate Form 8594 or do I do a separate Form 8594 on the shareholders personal return and list these two items there?

 

Thanks in advance for any insight you can provide!

[jklcpa]

1 hour ago, NewbieAcctant said:

Hello Everyone! Hopefully simple question here about the Form 8594. I have a doctor's practice (C Corp - Single shareholder) who is selling to another to another practice. On the purchase agreement there is an allocation of the sales price to the various classes of assets. For "Personal Goodwill" & "Covenant not to Compete"  Do I include these on the corporate Form 8594 or do I do a separate Form 8594 on the shareholders personal return and list these two items there?

 

Thanks in advance for any insight you can provide!

A tight sales agreement and transaction would have the amounts for personal goodwill and the covenant paid directly to the doctor. I had a similar agreement a few years ago (for a retail operation though) that originally did not have any allocation to "personal" goodwill and that was modified to designate some of the goodwill as personal, and the payments allocated as personal goodwill and the covenant were paid directly to the individual shareholders.  I did report the sale portion for personal goodwill and covenant on the shareholders' individual 1040s, and the portion for the corporate goodwill was reported on the 1120.

I was the preparer of the form 8594 and provided that for the purchaser's accounting firm.  I did not include the portion of the sales price that was allocated to personal goodwill or the covenant, only the portion of the sale proceeds actually received by/reported by the corporation since those are the amounts that will be reported on the corporate tax return.