What is Code Section 197?
Section 197 intangibles are certain intangible assets acquired after August 10, 1993 (or after July 25, 1991, if chosen) in connection with the acquisition of a business which must be amortized over 15 years from the date of acquisition regardless of the assets useful life.
What does anti churning mean?
Laws designed to prevent taxpayers from taking advantage of new laws by acquiring property eligible for benefits available under the new law from a related party that was used by the related property before the effective date of the new law.
What is a section 197 F )( 9 intangible?
197(f)(9) antichurning rules provide that in certain circumstances goodwill, going concern value, and other intangible assets for which depreciation or amortization previously would not have been allowable and that were held or used by the taxpayer or a related party at any time during the transition period (July 25.
Is software a section 197 intangible?
Intangibles amortizable under this provision are referred to as “Section 197 intangibles.” Today, computer software that is not amortizable over 15 years as a Code Section 197 intangible asset is usually depreciated using the straight-line method over three years beginning in the month it is placed in service.
Is goodwill a section 197 intangible?
Section 197(d)(1) provides that the term “section 197 intangible” means (A) goodwill; (B) going concern value; (C) any of the following intangible items: (i) workforce in place including its composition and terms and conditions (contractual or otherwise) of its employment, (ii) business books and records, operating …
What are 197 anti churning rules?
The anti-churning rules under Sec. 197(f)(9) were adopted in 1993 to prevent the amortization of goodwill or going concern value acquired by a taxpayer if the intangible was held or used by the taxpayer or a “related” person before Aug. 10, 1993.
What is a related party for tax purposes?
A related party is any person or entity bearing a relationship to the taxpayer. Although not an exhaustive definition, this includes: Family members, such as brothers, sisters, spouses, ancestors, and lineal descendants. (Stepparents, uncles, in-laws, cousins, nephews, and ex-spouses are not considered related.)
What is a section 197 transfer?
Section 197 of the Labour Relations Act deals with the transfer of a business and the rights of employees affected by such a transaction. The transfer does not interrupt an employee’s continuity of employment and an employee’s contract of employment continues with the new employer as if with the old employer.
Is goodwill a sec 197 intangible?
Does amortization get recaptured?
Section 1245 is a way for the IRS to recapture allowable or allowed depreciation or amortization the taxpayer has taken on 1231 property. This recapture occurs at the time a business sells certain tangible or intangible personal property at a gain.
Is software a 197 intangible?
Is a customer list a section 197 intangible?
Customer list #2 is an amortizable Sec. 197 intangible, subject to 15-year amortization, because it is a customer list obtained as part of acquiring a business.
When do the anti churning rules go into effect?
The anti-churning rules generally apply only to assets held by the taxpayer or a related party during the period beginning July 25, 1991 and ending Aug. 10, 1993. Unfortunately the anti-churning rules apply to all value of the ‘churned intangible’ and not just the value as of Aug. 10, 1993.
When does SEC 707 ( b ) apply to anti churning?
If such a strategy is adopted, Sec. 707 (b) would be the controlling Code section in determining whether two parties are considered to be related for purposes of the anti – churning rules, and Sec. 267 (b) would not apply.
Is there an anti churning rule for amortization?
Under this literal application of the attribution rules, the anti – churning rule would be triggered to disallow any amortization expense attributable to the goodwill or going concern value purchased from Target X.
What was the purpose of the section 197 rule?
The FAA addressed the section 197 anti-churning rules in the context of a domestic parent’s acquisition of a brand it purchased from a foreign subsidiary.