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On January 1, Fast, Inc., entered into a covenant not to compete with Swift, Inc., for a period of 5 years, with an option by Swift to extend it to 7 years. What is the amortization period of the covenant
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On January 1, Fast, Inc., entered into a covenant not to compete with Swift, Inc., for a period of 5 years, with an option by Swift to extend it to 7 years. What is the amortization period of the covenant for tax purposes?

User Kasinath Kottukkal
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Answer:

The amortization period will be 15 years for the tax purposes.

Step-by-step explanation:

In the case of covenant or any intangible assets ( like patents, copyright etc ) , when it is decided not to compete ( just like in the case given in the question ) , then the amortization can be done for a period of 15 years , starting from the month of acquisition , using the straight line basis.

User Thegnuu
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