Question

Firm W and Firm X both have goodwill and going-concern value worth approximately $1 million. However, only Firm X reports an amortization deduction with respect to its goodwill and going-concern value on its tax return. Can you explain this difference in tax treatment between the two firms

Answer 1

Explanation:

Firm W owns the business , both goodwill and going concern value are owned by it. So it has no tax liabilities and chooses not to report in its business tax return.

Firm X may have been acquired, it must amortize both goodwill and going concern for 15 years and that is why reported it on its tax return as deduction.

*Intangible assets that may not be listed on balance sheet during acquisition, must be amortized for 15 years.