Discussion:License or franchise agreement
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Discussion Forum Index --> Basic Tax Questions --> License or franchise agreement
Discussion Forum Index --> Tax Questions --> License or franchise agreement
| 9 December 2007 | |
| If the license or franchise agreement is for a limited time period such as 5 years do you sitll have to amortize the cost over 180 months??? | |
| 9 December 2007 | |
| I got up too early, but, I read Sec. 197(d)(1)(F), Franchise licences and their renewals ARE governed by Sec. 197 . However, isn't there some election (wow, real tired), to expense 197 stuff up to $5K the first year (with limits), then write the rest off over 5 years? Or is my lucid fantasy just for start-up costs? Anyone? ZZZZZZZZZZZZZZZZZZZZZZZZ | |
| 9 December 2007 | |
| the 5 year deal ended in 2004 and it was for organization and start up costs. My question deals with buying a franchise or license agreement or paying for a non compete clause for 5 years do I still have to amortize them over 180 months even though they will expire in 60 months | |
| 9 December 2007 | |
| This applies to Start-Up costs only: Before 10/23/04: $5000 the first year, then 60 months. I don't know when the first year was, let me know. | |
| 9 December 2007 | |
| Right now, and since 1994, intangibles including goodwill, going concern value, and noncompete covenants are covered by Sec. 197 - 180-month. Start-up and organizational expenses are not governed by 197, because they are not assets, but are expenses chargeable to a capital account, and can be expensed under 195, within limits like the pre-October 2004 $5000/60-month rule. Logically, if your 60-month S/U and Org. expenses were 60 months old in 2004, then write them off in '04, you're in the old-realm of Sec. 195. If we're talking about a franchise license, then the 180-month rule applies, whenever it occured.
NOTE: In the old days Goodwill and Going concern were non-depreciable, and were capital assets in the hands of the seller (assuming none of the going-concern could be considered 197 property at the time. So sellers would want as little non-compete as possible v. the other two at sale | |
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