The sale of a business is not usually a sale of one asset. Instead, all of the assets of the business are sold. Generally, when this occurs, each asset is treated as being sold separately for determining the treatment of gain or loss.
Both the buyer and seller involved in the sale of a business must report to the IRS the allocation of the sales price among the business assets. Use Form 8594, Asset Acquisition Statement Under Section 1060, to provide this information. The buyer and seller should each attach Form 8594 to their federal income tax return for the year in which the sale occurred.
A business usually has many assets. When sold, these assets must be classified as capital assets, depreciable property used in the business, real property used in the business, or property held for sale to customers, such as inventory or stock in trade. The sale of capital assets results in capital gain or loss. The sale of inventory results in ordinary income or loss. The gain or loss from the sale of real property or depreciable property can be treated in a variety of ways. More information on the sale of a business can be found in Publication 544, Sales and Other Dispositions of Assets.
