Amortizable Sec. 197 Intangible Assets
Amortization is a challenging concept for many taxpayers to understand. In short, it is an accounting practice that spreads the cost of an intangible asset over the course of its useable life. Although these are not physical assets, the IRS still recognizes the value of intangible assets.
Amortizable Section 197 intangible assets are those acquired in a trade or business or for the production of income. They include:
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Workforce in place,
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Information in place,
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Know-how,
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Customer and supplier-based intangibles,
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Government licenses and permits. These include,
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Liquor License
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Taxi-cab Medallion (or license)
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Franchises, trademarks, and trade names,
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Insurance policy expirations, and
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Bank deposit base.
The following assets are treated as Section 197 assets, if they are acquired in connection with the acquisition of a business:
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Covenants not to compete,
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Computer software,
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Films,
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Sound recordings,
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Video tapes and books,
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Copyrights and patents,
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Rights to receive tangible property or services,
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Interest in patents and copyrights,
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Mortgage servicing rights secured by residential real property, and
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Contract rights good for less than 15 years or fixed in amount.
The following assets are never Section 197 assets, regardless of how acquired: interests in corporations, partnerships and estates, computer software that is readily available for purchase by the general public, futures, foreign currency contracts, and notional principal contracts, land, leases of tangible property, debt instruments, tax-free transaction costs, accounts receivable.