What the form is actually reporting
IRS About Form 8594 and the form itself sit on residual-method classes. Cash and deposits, inventory, furniture and equipment, intangibles, and goodwill are not a suggestion. Both sides file. Inconsistent classes are how audits start. A CPA prepares the form. Both sides file. Inconsistent classes are how audits start. A CPA prepares the form. A broker does not. Put a framework in the letter if the shop is cell-heavy so Class V versus goodwill is not invented the week of close. Waiting until December is how wires slip and relationships burn. A pure stock sale is a different regime. Some files still allocate inside a 338 conversation. Counsel decides. Do not assume silence equals no form.
Jason Taken is a business broker. He does not.
If you are selling a manufacturing business as an asset deal, put a framework in the letter of intent. Waiting until the week of close is how December wires slip. Taxes when selling is the tax companion. This page will not steal that title.
A pure stock sale is a different regime. Some files still allocate inside a 338 conversation. Counsel decides. Do not assume silence.
Why Class V dollars get loud on a cell-heavy shop
Buyers want basis on Class V machinery they can depreciate. Sellers often want more on Class VI/VII intangibles. On a shop with a late 5-axis battery, the dollars are large. An M&E appraisal informs the fight. It does not replace negotiation. Orderly liquidation value, fair market value, and tax book are different numbers. Do not freeze an old 100% bonus-depreciation rate into a 2026 memo. Allocation sets basis. Bonus and § 179 are year-specific recovery rules.
Main Street manufacturing in BizBuySell’s 2021–2025 set cleared at a 2.75x median SDE (Source: Iconic / BizBuySell). That marker does not decide your Class V number. GF Data-style larger-EV prints do not decide it either.
| Residual class (plain language) | Typical plant pile | Common fight | Who drafts |
|---|---|---|---|
| Inventory | Raw, WIP, finished | Peg versus 8594 draft | CPA + both sides |
| Machinery / equipment | Owned cells, not customer tools | Class V versus goodwill | CPA + appraiser input |
| Real estate | Deed if the dirt is in | Cap rate versus multiple | CPA + RE professional |
| Intangibles / goodwill | Name, backlog, certificates | Seller tax versus buyer basis | Counsel + CPA |
How the peg and the form must share a draft
Inventory is typically Class IV. That is why the working-capital peg and the 8594 draft should be written together. A peg that stuffs the cage in month eleven and a form that pretends inventory was thin will not both be true. Should I sell the real estate with the plant is a different stack. Do not bury the deed inside Class V.
SBA 7(a) still caps at $5 million (Source: SBA). The loan does not allocate the classes. The CPA does.
The FAQ index owns the question. The owner URL owns the Class V fight and the appraisal warning.
Should allocation live in the letter of intent?
A framework should. Waiting until the week of close is how December wires slip and relationships burn. Name the intended structure — asset or stock — and a Class V versus goodwill range if the shop is cell-heavy. Name that inventory will be drafted with the peg. Name that customer-owned tooling is not Class V.
A stock sale does not automatically skip allocation. Some deals still allocate inside a 338 conversation. Counsel decides. Bonus depreciation is not allocation. Allocation sets basis. Recovery rules are year-specific. Do not freeze an old 100% bonus rate into a 2026 memo.
On a cell-heavy shop the Class V dollars are large because buyers want depreciable basis and sellers want intangibles. An M&E appraisal informs that fight. It does not replace it. OLV, FMV, and tax book are different numbers. Customer-owned tooling is not Class V. Inventory is typically Class IV and should be drafted with the peg so month-eleven stuffing and a thin form cannot both be true.
The FAQ index owns the question. The owner URL owns the Class V fight and the appraisal warning. Inventory is typically Class IV and should be drafted with the peg. Customer-owned tooling is not Class V. OLV, FMV, and tax book are different numbers. An appraisal informs the fight. It does not replace the CPA. Both sides file. Inconsistent classes start audits.
On a cell-heavy shop the Class V dollars are large because buyers want depreciable basis and sellers want intangibles. Put a framework in the letter so December does not invent the split. A stock sale does not automatically skip the form. Some files still allocate inside a 338 conversation. Counsel decides. Bonus depreciation is year-specific. Do not freeze an old 100% rate into a 2026 memo.
The residual method is a statute, not a negotiation vibe. Write Class IV with the peg so month-eleven stuffing and a thin form cannot both be true. A broker does not prepare the form. A CPA does.
Jason Taken is a business broker, not a CPA. Educational information only. Confirm the residual method with the CPA and counsel. After you read the owner URL, book a confidential intro call if the file is real.