What is Goodwill amortisation?

IRS Schedule C CPA discusses Goodwill Amortization in Sole Proprietorships  April 1, 2016 – 09:51 am

Schedule C CPA Goodwill CPA

Gary Bode, CPA: IRS Schedule C can have complex tax issues. (910) 399-2705.

Schedule C CPAs don’t see Goodwill amortization that often. Probably because most sole proprietorships start from scratch and don’t purchase an existing business. Plus they often outgrow Schedule C before hiring a CPA. But every Schedule C CPA knows complex issues arise in sole proprietorships. I’ll deal with one such issue in this post; Goodwill and how to amortize it (write it off) on Schedule C.

So what’s Goodwill?

Goodwill is the value of a business purchase less the fair market value of the assets purchased. It might include the seller’s reputation, brand, existing customer base etc. Note the IRS is picky about the Goodwill calculation. I’ll be using a purchased Chiropractic practice as an example. So if a Chiropractor buys a practice for $250, 000 and:

  • Computer systems had a $3000 Fair Market Value.
  • Equipment had a $7000 FMV.
  • The no compete agreement had a $5000 value.

Goodwill, by default, has a value of $235, 000 (250-3-7-5).

Source: Gary L. Bode, MSA, CPA, pc

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