Monday, July 25, 2011

Section 197 Intangibles- Amortization

What are IRS Section 197 Intangibles- Amortization?

Normally the goodwill of a business is a non-depreciable asset. However, congress made an exception.

§ 197 : Taxpayers are allowed to recover the cost of a wide range of purchased intangibles, including goodwill and other “customer based intangibles,” on a straight line basis over 15 years, without regard to the actual useful life of the asset.

  1. § 197 usually does not apply to intangibles created by the taxpayer itself.
  2. Little practical significance because taxpayers can deduct the majority of costs used to create goodwill under § 162
  3. § 197 only comes into effect when goodwill is purchased

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