Which of the following statements concerning business goodwill is false?
A) If a business creates goodwill by developing a loyal customer base and generating brand name recognition, the tax basis in the goodwill is zero.
B) When a taxpayer purchases a business and capitalizes the cost allocated to goodwill, the cost basis is not amortized for financial reporting purposes.
C) When a taxpayer purchases a business and capitalizes the cost allocated to goodwill, the cost basis may be amortized over 15 years for tax purposes.
D) The tax deduction for goodwill amortization is an unfavorable book/tax difference.

Question

Quizplus · Accepted Answer

The statement "The tax deduction for goodwill amortization is an unfavorable book/tax difference" is false. Goodwill amortization is a tax deductible expense, which means it reduces taxable income and results in a tax benefit. This creates a favorable book/tax difference.

Which of the Following Statements Concerning Business Goodwill Is False