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Goodwill hunting: Deductions over time

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in Small Business Tax,Small Business Tax Deduction Strategies

Q. Can you take a goodwill deduction when you buy an existing business? S.B, Cayuga Falls, N.Y.

A. Not exactly. Assuming you can place a value on the goodwill of the business you are acquiring, you can write off the cost attributable to goodwill over time. Under Section 197 of the tax code, the cost of purchased goodwill and similar intangible assets must be amortized over 15 years. Typically, the value established for goodwill becomes a bargaining chip in the sale of the business.

Tip: The amortization of goodwill begins in the month in which the business acquisition takes place.

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