On January 1,2013,Ted purchased a small software company for $200,000.He paid $95,000 for the fixed assets of the company and $105,000 for goodwill.How much amortization may Ted deduct on his 2013 tax return for the purchased goodwill?

Question

Quizplus · Accepted Answer

Goodwill is an intangible asset with an indefinite useful life, which means it cannot be amortized over a period of time. However, it must be tested for impairment annually, and any impairment losses may be deductible. Since Ted purchased the company in 2013, he cannot deduct any amortization expense for the goodwill. Therefore, the correct answer is B) $7,000, as this is not an option and no deduction for amortization of goodwill is allowed.

On January 1,2013,Ted Purchased a Small Software Company for $200,000