42.17 Amortizing Goodwill and Other Intangibles (Section 197)

The costs of intangibles coming within Section 197 are amortized over a 15-year period. The 15-year period applies regardless of the actual useful life of “Section 197 intangibles” acquired after August 10, 1993 (or after July 25, 1991, if elected), and held in connection with a business or income-producing activity.

Generally, the amount subject to amortization is cost. Annual amortization is reported on Form 4562. The 15-year period starts with the month the intangible was acquired.

A “Section 197 intangible” is: (1) goodwill; (2) going-concern value; (3) workforce in place; (4) information base; (5) know-how, but see exceptions below; (6) any customer-based intangible; (7) any supplier-based intangible; (8) any license, permit, or other right granted by a governmental unit or agency; (9) any covenant not to compete made in the acquisition of a business; and (10) any franchise, trademark, or trade name.


Goodwill is the value of a business attributable to the expectancy of continued customer patronage, due to the name or reputation of a business or any other factor.

Franchises, trademarks, and trade names.

A franchise (excluding sports franchises), trademark, or trade name is a Section 197 intangible. Amounts, whether fixed or contingent, paid on the transfer of a trademark, trade name, or franchise are chargeable to capital account and must be ratably amortized over a 15-year period. The renewal of a franchise, ...

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