Assume that Brittany acquires a competitor's assets on September 30ᵗʰ of year 1 for $350,000. Of that amount, $300,000 is allocated to tangible assets and $50,000 is allocated equally to two §197 intangible assets (goodwill and a 1-year non-compete agreement). Given, that the non-compete agreement expires on September 30ᵗʰ of year 2, what is Brittany's amortization expense for the second year? (Round final answer to the nearest whole number.)

Question

Quizplus · Accepted Answer

The full-month convention applies. If a §197 asset is disposed of before it is fully recovered, the remaining basis is added to the remaining §197 assets acquired at the same time. §197 assets have a recovery period of 180 months. The amortization is $3,333 ($50,000/180) × 12. The result is as if the asset never expired.

Assume That Brittany Acquires a Competitor's Assets on September 30ᵗʰ