Amortization
Amortization is a cost-recovery method primarily used to depreciate the cost of intangible assets. Section 197 intangibles are amortized over a 15-year period regardless of the actual useful life.  

Section 197 Intangibles:

  1. Goodwill;
  2. Any customer-based intangible (customer base, circulation base, insurance in force, etc.);
  3. Any license, permit or other right granted by a governmental authority;
  4. Franchise, trademarks and trade names;
  5. Business patent, copyright, design, process or formula; and
  6. Cost to acquire customer lists, subscription lists and other operating systems.

Not-Section 197 Intangibles:

  1. Certain computer software;
  2. Land interests;
  3. Interests in a corporation, partnership, trust or estate;
  4. Sports franchises;
  5. Interests under existing leases of tangible property; and
  6. Certain financial contracts.

The allowable amortization amount is cost, the 15-year period starts with the month the intangible was acquired and it is reported on Form 4562.

Disallowed Losses:
If a Section 197 intangible is disposed of at a loss (and at the same time retains other Section 197 property acquired in the same transaction), the loss will be disallowed. The loss may, however, be added to the cost basis of the retained Section 197 intangibles.

Depletion

Related Articles
  1. Investing

    Explaining Amortization In The Balance Sheet

    Amortization is important to account for intangible assets. Read to find out more about amortization.
  2. Investing

    Explaining Amortization In The Balance Sheet

    Amortization occurs when an asset’s value decreases over time, usually over its estimated useful life.
  3. Managing Wealth

    How to Calculate Your Tangible Net Worth

    You can calculate your tangible net worth with a simple equation.
  4. Investing

    Goodwill and Intangible Assets: One And The Same?

    "Goodwill" is a broad category for non-physical assets that are impossible to separate from the business itself, whereas "intangible assets" are individually identifiable and can be sold separately ...
  5. Managing Wealth

    Comparing Tangible and Intangible Assets

    Tangible assets are physical assets such as land, vehicles or equipment.
  6. Investing

    Explaining Tangible Net Worth

    Tangible net worth is determined by taking total assets, then subtracting liabilities and intangible assets.
  7. Small Business

    Understanding Organic Growth

    Organic growth is the increase in a company’s revenue and value due to internal operations.
  8. Managing Wealth

    Explaining Financial Assets

    A financial asset is intangible property that represents a claim on ownership of an entity or contractual rights to future payments.
  9. Investing

    How To Calculate Goodwill

    Goodwill is an intangible, but it is still possible to effectively calculate or estimate goodwill for a company.
Frequently Asked Questions
  1. What is the difference between secured and unsecured debts?

    The differences between secured and unsecured debt, and how banks buffer risks associated with each type of loan through ...
  2. How Many Times has Warren Buffett Been Married?

    Warren Buffett has been married twice in his life, but the circumstances surrounding the marriages were unconventional.
  3. What's the smallest number of shares of stock that I can buy?

    Many people would say the smallest number of shares an investor can purchase is one, but the real answer is not as straightforward. ...
  4. What is an economic moat?

    An economic moat refers to a company's ability to maintain competitive advantages to protect its long-term profits and market ...
Trading Center