Question

derek purchases a small business from art on july 30, 2021. he paid the following amounts for the business: fixed assets $180,000 goodwill 40,000 covenant not to compete 30,000 total $250,000 question content area a. how much of the $250,000 purchase price is for section 197 intangible assets? $ fill in the blank 404312fdd03e05f 1 question content area b. what amount can derek deduct on his 2021 tax return as section 197 intangible amortization? use months, not days, in your computations. round your answer to the nearest dollar. $ fill in the blank 89e41500dfa906a 1

Answer 1

a. The amount from $250,000 purchase price that is for section 197 intangible assets is $70000.

b. The amount that Derek deduct on his 2021 tax return as section 197 intangible amortization is $2,333

What is an intangible asset?

An intangible asset is one that does not have physical substance. Patents, copyright, franchises, goodwill, trademarks, and trade names, as well as software, are examples. This contrasts with physical and financial assets. An intangible asset is a distinct non-monetary item that lacks physical substance.

From the $250,000 purchase price the intangible assets for sec 197 are

Goodwill = $40,000

Covenant not to compete=$30,000

Total = $40000 + $30000 = $70,000

b) As per sec 197 these intangibles need to be amortized over a period of 15 years beginning from the date of acquisition irrespective of the useful life.

So amortization,

= 70,000/15=$ 4667 yearly

Since 2019 starting from 1st July to 31st Dec 2019

= 4667*6/12= $2,333

Learn more about assets on:

https://brainly.com/question/14892188

#SPJ1