Depreciation of customer-based intangibles: Good news for taxpayers

Congress and the US Supreme Court have acted to allow depreciation of a customer list purchased in the acquisition of a going concern. This represents a major gain for all insurance agencies because the prior position of the IRS had been to deny depreciation of the value of the customer list if the...

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Bibliographic Details
Published inCPCU journal Vol. 46; no. 4; p. 232
Main Authors Boose, Mary Ann, Ittenbach, Virginia S
Format Journal Article
LanguageEnglish
Published Media Society of Chartered Property and Casualty Underwriters 01.12.1993
Subjects
Acquisitions & mergers
Asset acquisitions
Depreciable assets
Going concerns
Goodwill
Insurance agencies
Intangible assets
Lists
OBRA 1993-US
Patronage
Purchasing
Reconciliation
Supreme Court decisions
Taxpayers
Useful life
US
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Summary:Congress and the US Supreme Court have acted to allow depreciation of a customer list purchased in the acquisition of a going concern. This represents a major gain for all insurance agencies because the prior position of the IRS had been to deny depreciation of the value of the customer list if the purchase agreement included other assets. For purchases after August, 10, 1993, the Revenue Reconciliation Act of 1993 requires depreciation of customer-based intangibles and goodwill over a 15-year life. If structured correctly, purchases prior to this date may take advantage of the recent Supreme Court ruling in Newark Morning Ledger Co. v. US that qualifies the cost of the customer base for depreciation over its useful life. Either alternative will increase the market value of insurance agencies and companies.
ISSN:0162-2706
2163-1786