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Stephen G.
Stephen G., Sr Financial Expert
Category: Finance
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Experience:  Extensive Experience with Tax, Financial & Estate Issues
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I am planning on buying an optometry practice. We are in negotiations

Resolved Question:

I am planning on buying an optometry practice. We are in negotiations now to allocate the purchase price of an asset sale. My question is regarding the ability to amortize goodwill and the covenant not to compete. I seem to be getting conflicting information on my research.
Submitted: 4 years ago.
Category: Finance
Expert:  Stephen G. replied 4 years ago.

Stephen E. Grizey :

Goodwill in the form of any intangible asset, such as the excess of the purchase price over the fair market value of the tangible assets, may be amortized over a 15 year period beginning with the month the intangible is placed in service.

Stephen E. Grizey :

This would include the covenant not to compete. Previously, the amortization of the value assigned to the covenant would have been able to be amortized over the life of the covenant, basically the term of the non-compete period. Now however all of these type of intangibles must be amortized over the 15 year period described above.

Stephen E. Grizey :

Any intangible that is assigned a value, customer lists, workforce-in-place, exclusive product rights, whatever........all fall under IRC Section 197 & must be amortized as stated over the same 15 year period.

Stephen E. Grizey :

If you tell me what the "conflicting information" was, that you found, perhaps I can clear it up for you, if the above explanations doesn't do so already.

Stephen E. Grizey :

Please remember to "ACCEPT". Feedback, if you have time & bonuses where you think they are warranted are always most appreciated. I'll be happy to answer any follow-up questions you may have.

Customer:

Thank you. I found some information that in 2001 goodwill could no longer be amortized, but your information corresponds to what seems to be most recent.

Stephen E. Grizey :

Right. The law changed on that because we started calling the "goodwill" everything under the sun to be able to amortize it.

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