On January 1, in connection with the purchase of all of the assets of Joe Swift's business, Fast, Inc. entered into a covenant not to compete with Joe for a period of five years, with an option by Joe to extend it to seven years. What is the amortization period of the covenant for tax purposes?

Question

Business

India

20 September, 20:03

On January 1, in connection with the purchase of all of the assets of Joe Swift's business, Fast, Inc. entered into a covenant not to compete with Joe for a period of five years, with an option by Joe to extend it to seven years. What is the amortization period of the covenant for tax purposes?

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Answers (1)

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Amy Mccann · Answer 1

fifteen years

Explanation:

This agreement or covenant to not compete, should be considered a section 197 intangible asset since it was acquired with the acquisition or purchase of another company. All section 197 intangible assets must be depreciated over a 15 year period regardless of the useful life of the asset.