Avoiding Ordinary Income Recapture on the Sale of Intangibles
Intangible assets are assets that are not physical in nature, meaning they can’t be touched. Intangible assets include patents, copyrights, know how, goodwill, etc… For many businesses the largest asset section is often comprised of intangible assets.
For tax purposes, intangible assets associated with a business transaction are covered by Internal Revenue Code Section 197. Code Section 197 allows taxpayers to amortize intangible assets over a 15-year period on a straight-line basis beginning with the month an intangible asset is acquired. Code Section 197 intangibles are treated as depreciable property. This means they are subject to depreciation recapture the same as tangible assets.
When selling a previously acquired business, there is a great chance that a substantial amount of the gain will be subject to ordinary tax treatment due to depreciation recapture from both the previously acquired tangible and intangible assets.
This webinar will provide an overview of available planning opportunities to help avoid ordinary income recapture on the sale of certain intangible assets.