You must generally amortize over 15 years the capitalized costs of “section 197 intangibles” you acquired after August 10, 1993. You must amortize these costs if you hold the section 197 intangibles in connection with your trade or business or in an activity engaged in for the production of income.
Note: You may not be able to amortize section 197 intangibles acquired in a transaction that did not result in a significant change in ownership or use. Refer to Anti-Churning Rules in Publication 535, Business Expenses.
Intangible Property is property that has value but cannot be seen or touched. It includes things such as:
- Going concern value.
- Workforce in place.
- Business books and records, operating systems, or any other information base, including lists or other information concerning current or prospective customers.
- A patent, copyright, formula, process, design, pattern, know-how, format, or similar item.
- A customer-based intangible.
- A supplier-based intangible.
- Any item similar to items (3) through (7).
- A license, permit, or other right granted by a governmental unit or agency (including issuances and renewals).
- A covenant not to compete entered into in connection with the acquisition of an interest in a trade or business.
- Any franchise, trademark, or trade name.
- A contract for the use of, or a term interest in, any item in this list.
Note: You cannot amortize any of the intangibles listed in items (1) through (8) that you created rather than acquired unless you created them in acquiring assets that make up a trade or business or a substantial part of a trade or business. For a complete discussion of intangibles refer to Chapter 8, Amortization, in Publication 535, Business Expenses.
Internal Revenue Bulletin 2004-7: Guidance Regarding Deduction and Capitalization of Expenditures
This document contains final regulations that explain how section 263(a) of the Internal Revenue Code (Code) applies to amounts paid to acquire or create intangibles. The final regulations identify categories of intangibles for which capitalization is required.
Note: This page contains one or more references to the Internal Revenue Code (IRC), Treasury Regulations, court cases, or other official tax guidance. References to these legal authorities are included for the convenience of those who would like to read the technical reference material. To access the applicable IRC sections, Treasury Regulations, or other official tax guidance, visit the Tax Code, Regulations, and Official Guidance page. To access any Tax Court case opinions issued after September 24, 1995, visit the Opinions Search page of the United States Tax Court.