Buying a business

[kentchidester]

I bought out a business in 2025 and he is using a IRS form 6252 for income from that sale.  How do I put the purchase on TurboTax?

[DianeW777]

Report the business as if you bought it from the bank. The interest portion of your payment would be a business expense. As far as other items and their deduction, it depends on what you actually purchased. Your cost of each property associated with the purchase must match the same amount used by the seller.

• Goodwill - Section 197 Intangible- Acquired goodwill is amortized straight-line over 15 years
• Equipment - 7 or 5 year property as a rule
• Building - Depreciated over 39 years (nonresidential real estate)

Most importantly is that both the buyer and seller must have the exact same information on Form 8594.  Use the link to print the form and complete it.  A second option would be e-file your tax return and then file an amended return attaching only that form.

Who must file Form 8594?

Both the seller and purchaser of a group of assets that makes up a trade or business must use Form 8594 to report such a sale if:

• goodwill or going concern value attaches, or could attach, to such assets and
• the purchaser's basis in the assets is determined only by the amount paid for the assets.

When To File

Generally, attach Form 8594 to your income tax return for the year in which the sale date occurred.

If the amount allocated to any asset is increased or decreased after the year in which the sale occurs, the seller and/or purchaser (whoever is affected) must complete Parts I and III of Form 8594 and attach the form to the income tax return for the year in which the increase or decrease is taken into account.

Update here with additional details if you require further assistance.

[kentchidester]

Thanks,  I am filing a 8594 on the buyout.  I don't see where TurboTax has this in their program so I am assuming I need to add this when mailing.  I was also trying to find where to put the purchase amount for 2025 on their form.  I initially put it in commissions to figure amount owed but I don't believe that's where it should be

[DianeW777]

Yes, you must add this when mailing or e-file your return, then use a Form 1040-X with no changes and include Form 8594. Either way is acceptable once you know what to use on your 2025 tax return.  It's your decision if you prefer to mail your complete return.

Please tell us exactly what you are paying for, i.e., every asset being purchased, then we can provide the exact location to put the information in your tax return.  A cost of purchasing a business includes many assets and both you and the seller must agree on how the purchase price is divided among the assets. This is the purpose for Form 8954.

Some examples were provided and shown here for convenience. Until we know exactly what your are purchasing, we can't advise where to enter your costs.

• Goodwill - Section 197 Intangible- Acquired goodwill is amortized straight-line over 15 years
• Equipment - 7 or 5 year property as a rule
• Building - Depreciated over 39 years (nonresidential real estate)

Once we have more details we can further assist you with your return.

@kentchidester 

[kentchidester]

Thanks.  I am buying a book of insurance business and paying 50% in 2025 and 50% in 2026.

The seller, my partner, is doing both a 8594 and 6252.  Do I need to do a 6252 as a buyer?  Why do I have to file a 1040X when there are no changes? I am confused on that part.

I figure I will just print out the TurboTax and then attach forms to it.  My main concern is I have put the 50% of purchase price (2025) in as commission paid as I don't see anything else to put it to get a proper cost.  Do you know if there is another place to put it?

Kent

[DianeW777]

No, you do not need the Form 6252, this is strictly for the tax return of the seller. The purchase sounds to me like you are purchasing a client list and goodwill. It's not a direct write off and will fall into one of the intangible category. See information below.

• IRS Guide to Business Expense Resources
• IRS Intangibles

Section 197 Intangibles

• Goodwill & Going Concern: The value of a business exceeding its net identifiable assets, including reputation and customer loyalty.
• Workforce in Place: The composition and experience of the existing workforce.
• Information Bases: Customer lists, client files, or operating systems.
• Intellectual Property: Patents, copyrights, formulas, processes, designs, and know-how.
• Rights & Licenses: Government-granted licenses, permits, franchises, trademarks, and trade names.
• Covenants Not to Compete: Agreements entered into during an acquisition

It will not be a deduction in full in the year of purchase.

@kentchidester