Contemporary Tax Practice: Chapter 17 I\'ve January 1 starlight Corp (a calendar

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Contemporary Tax Practice: Chapter 17
I've January 1 starlight Corp (a calendar year tax payer) recorded 600,000 of goodwill as a result of a business acquisition that made it. The corporation elected to amortize it over 15 years for tax accounting and uses the impairment method for financial accounting purposes. Assume the impairment write offs are $15,000 in year 1 $60,000 in year 5 and 300,000 in year 25.
1. What is the annual schedule M-1 adjustment for each year during the first 15 years of the amortization period?
2. What is the annual schedule M- adjustment for each year during the last 25 years of the amortization period?
3. What is the deferred tax asset or liability balance for year 1, 5 and 25 assuming a 35% marginal tax rate? Contemporary Tax Practice: Chapter 17
I've January 1 starlight Corp (a calendar year tax payer) recorded 600,000 of goodwill as a result of a business acquisition that made it. The corporation elected to amortize it over 15 years for tax accounting and uses the impairment method for financial accounting purposes. Assume the impairment write offs are $15,000 in year 1 $60,000 in year 5 and 300,000 in year 25.
1. What is the annual schedule M-1 adjustment for each year during the first 15 years of the amortization period?
2. What is the annual schedule M- adjustment for each year during the last 25 years of the amortization period?
3. What is the deferred tax asset or liability balance for year 1, 5 and 25 assuming a 35% marginal tax rate?
I've January 1 starlight Corp (a calendar year tax payer) recorded 600,000 of goodwill as a result of a business acquisition that made it. The corporation elected to amortize it over 15 years for tax accounting and uses the impairment method for financial accounting purposes. Assume the impairment write offs are $15,000 in year 1 $60,000 in year 5 and 300,000 in year 25.
1. What is the annual schedule M-1 adjustment for each year during the first 15 years of the amortization period?
2. What is the annual schedule M- adjustment for each year during the last 25 years of the amortization period?
3. What is the deferred tax asset or liability balance for year 1, 5 and 25 assuming a 35% marginal tax rate?
1. What is the annual schedule M-1 adjustment for each year during the first 15 years of the amortization period?
2. What is the annual schedule M- adjustment for each year during the last 25 years of the amortization period?
3. What is the deferred tax asset or liability balance for year 1, 5 and 25 assuming a 35% marginal tax rate? 1. What is the annual schedule M-1 adjustment for each year during the first 15 years of the amortization period?
2. What is the annual schedule M- adjustment for each year during the last 25 years of the amortization period?
3. What is the deferred tax asset or liability balance for year 1, 5 and 25 assuming a 35% marginal tax rate?

Explanation / Answer

IRS says that Goodwill is to be amortized over a period of 180 months.

Section 197 Intangibles Defined

The following assets are section 197 intangibles and must be amortized over 180 months:

Goodwill;

Going concern value;

Workforce in place;

Business books and records, operating systems, or any other information base, including lists or other information concerning current or prospective customers;

A patent, copyright, formula, process, design, pattern, know-how, format, or similar item;

A customer-based intangible;

A supplier-based intangible;

Any item similar to items (3) through (7);

A license, permit, or other right granted by a governmental unit or agency (including issuances and renewals);

A covenant not to compete entered into in connection with the acquisition of an interest in a trade or business;

Any franchise, trademark, or trade name; and

A contract for the use of, or a term interest in, any item in this list.

Expense as per Tax should be 200,000 for three years. So there will be Deferred tax asset created for first three years which will then be adjusted going forwards as per the accounting books in 25 years.

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