Question 1

How long does Section 197 intangible amortization take?

Accepted Answer

Section 197 intangibles (goodwill, patents acquired with business, trademarks, customer lists) must be amortized over 15 years using straight-line method. This is mandatory - you cannot choose a different period or method.

Question 2

When does amortization begin?

Accepted Answer

Amortization begins in the month the intangible is acquired, or at the beginning of the following month. For tax purposes, you can choose either starting point, but must be consistent.

Question 3

Can separately acquired patents be amortized differently?

Accepted Answer

Yes. Patents acquired separately (not with a business) can be amortized over their useful life, not necessarily 15 years. However, if acquired as part of a business purchase, they become Section 197 intangibles with 15-year amortization.

Question 4

What about off-the-shelf software?

Accepted Answer

Off-the-shelf computer software is amortized over 3 years (not Section 197). Software developed internally is capitalized and amortized. Software acquired with a business falls under Section 197 (15 years).

Question 5

Can impairment losses be deducted immediately?

Accepted Answer

Yes. If an intangible asset becomes impaired (fair value less than carrying value), the impairment loss can be deducted immediately for tax purposes. This creates a permanent book-tax difference.

Year	Book Amort	Tax Amort	Book Remain	Tax Remain
1	$ 33333	$ 33333	$ 466667	$ 466667
2	$ 33333	$ 33333	$ 433333	$ 433333
3	$ 33333	$ 33333	$ 400000	$ 400000
4	$ 33333	$ 33333	$ 366667	$ 366667
5	$ 33333	$ 33333	$ 333333	$ 333333
6	$ 33333	$ 33333	$ 300000	$ 300000
7	$ 33333	$ 33333	$ 266667	$ 266667
8	$ 33333	$ 33333	$ 233333	$ 233333
9	$ 33333	$ 33333	$ 200000	$ 200000
10	$ 33333	$ 33333	$ 166667	$ 166667

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