Small Acquisition (Under $500K): Section 179 Expensing and Form 8594 Requirements

Smaller acquisitions often benefit from full Section 179 expensing for tangible assets, but goodwill still requires 15-year amortization. Even at this scale, proper Form 8594 allocation prevents IRS mismatch notices and ensures all available deductions are captured.

Section 179 may cover most tangible assets. The Section 179 deduction allows you to expense up to $1,220,000 (2024 limit) in qualifying equipment and property in the year you place it in service. For a sub-$500K deal, that limit likely absorbs most or all tangible asset costs, front-loading your deductions rather than spreading them over years of depreciation.

Goodwill still amortizes over 15 years. Whatever portion of the purchase price is allocated to goodwill under Section 197 cannot be expensed immediately. A $300K acquisition might allocate $150K to goodwill, producing $10,000 per year in amortization deductions for 15 years.

Form 8594 is still required. Even on small deals, both buyer and seller must report the purchase price allocation across asset classes. The IRS matches these filings, so disagreements get flagged.

The tradeoff: Simpler structure means lower advisory costs, but skipping professional allocation guidance on Form 8594 can leave significant deductions on the table or trigger an IRS mismatch notice.