Full file at https://testbankuniv.eu/Taxation-of-Business-Entities-2017-8th-Edition-Spilker-Solutions-Manual
Solutions Manual – McGraw-Hill’s Taxation, by Spilker et al. A §197 intangible is a purchased intangible including: goodwill, going concern value, workforce in place, patents, customer lists, and similar assets. §197 intangibles are amortized over 180 months (15 years) using the straight-line method, and the full-month convention. To prevent game- playing among the basis allocations of various §197 intangibles acquired together, no loss is allowed on a §197 intangible until the last intangible purchased together is disposed of. For example, in the past, taxpayers would allocate substantial basis to a 3-year covenant not to compete or some other short-lived intangible rather than goodwill (with a longer recovery period). If a §197 intangible expires or is disposed of before the 180-month amortization period expires any remaining basis of the disposed intangible is allocated among the remaining intangibles purchased at the same time. 31. [LO 4] Compare and contrast the tax and financial accounting treatment of goodwill. Are taxpayers allowed to deduct amounts associated with self-created goodwill? US GAAP requires goodwill to be capitalized and tested annually for impairment. If and when the goodwill is impaired, the difference between the book value and the new fair value will be expensed. For tax purposes, goodwill is treated like any other §197 intangible. §197 intangibles are amortized over 180 months (15 years) using the straight-line method, and the full-month convention. With respect to self-created assets taxpayers must amortize any capitalized costs (any unamortized research and experimentation expenses and with fees necessary to create the asset) over the life of the asset. For financial accounting these costs are normally expensed. 32. [LO 4] Compare and contrast the similarities and differences between organizational expenditures and start-up costs for tax purposes. Organizational expenditures and start-up costs are sometimes confused because both expense types are similar in that they are both incurred about the time the business begins. However, the expenses relate to different concerns. Start-up costs are costs that would be deductible as ordinary trade or business expense under §162, except for the fact that the trade or business had not started. An example of start-up costs is employee wages incurred before actual production begins at the factory. Alternatively, organizational expenditures relate to professional fees related to creating the entity. An example of organizational expenditures is attorney fees incurred for preparation of the corporate charter or partnership agreement. Additionally, all businesses can deduct start-up costs, but only corporations and partnerships can deduct organizational expenditures.
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Full file at https://testbankuniv.eu/Taxation-of-Business-Entities-2017-8th-Edition-Spilker-Solutions-Manual