PROFESSIONAL PRACTICE TRANSITIONS, SECTION 197, AND THE ANTI-CHURNING RULES

One of the new more perplexing mazes for the tax adviser to negotiate involves the anti-churning rules of Section 197. Taxpayers generally can claim an amortization deduction over a 15-year period on purchased intangible assets defined as "amortizable Section 197 intangibles" to the extent...

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Bibliographic Details
Published inThe Practical Tax Lawyer Vol. 32; no. 4; pp. 23 - 31
Main Authors Altieri, Mark P, Prescott, William P
Format Trade Publication Article
LanguageEnglish
Published Philadelphia American Law Institute 01.07.2018
Subjects
Amortization
Asset acquisitions
C corporations
Covenants
Families & family life
Fractional interests
Goodwill
Intangible assets
Limited liability companies
Professional practice
Related parties
Tax regulations
Tax services
United States > US
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Summary:One of the new more perplexing mazes for the tax adviser to negotiate involves the anti-churning rules of Section 197. Taxpayers generally can claim an amortization deduction over a 15-year period on purchased intangible assets defined as "amortizable Section 197 intangibles" to the extent they are acquired after Augu 10, 1993 and held in connection with the conduct of an active trade or business or for the production of income. Amortizable Section 197 intangibles most commonly include goodwill and going-concern value purchased in connection with the acquisition of a business. Covenants not to compete provided by the seller to the buyer incident to the acquisition of a business or practice are also amortizable Section 197 intangibles. Self-created intangibles (as opposed to purchased intangibles) are not amortizable Section 197 intangibles. The concepts analyzed in this article are particularly germane to the complete or fractional purchase and sale of a professional practice. Our examples will illustrate the tax results in that context.
ISSN:0890-4898
2640-9488