What are anti-churning rules?

Anti-churning rules prevent a taxpayer from amortizing most section 197 intangibles under IRC §197 if the transaction in which they were acquired occurred before August of 1993 or did not result in a significant change in ownership or use if the transaction.

What are section 197 intangibles?

Section 197 intangibles are certain intangible assets acquired after August 10, 1993 (or after July 25, 1991, if chosen) in connection with the acquisition of a business which must be amortized over 15 years from the date of acquisition regardless of the assets useful life.

What are 197 anti churning rules?

The anti-churning rules under Sec. 197(f)(9) were adopted in 1993 to prevent the amortization of goodwill or going concern value acquired by a taxpayer if the intangible was held or used by the taxpayer or a “related” person before Aug. 10, 1993.

What is constructive ownership in a partnership?

Constructive ownership includes ownership by any partner having an interest of 5 % or more in either the capital or profits of the partnership in proportion to his or her interest in capital or profits, whichever such proportion is the greater.

What type of property are intangible assets?

Intangible personal property is any type of asset that has value but isn’t physical in nature. Examples of intangible personal property are copyrights, patents, intellectual property, and investments. Assets that can be represented with social or reputational capital also qualify as intangible personal property.

Are transaction costs 197 intangibles?

Section 197 (costs associated with acquiring certain section 197 intangibles can be added to the cost basis of the assets and amortized over the life of the asset — typically 15 years). Note that transaction costs are not considered section 197 assets.

Which intangible assets are amortized?

Intangible assets, such as patents and trademarks, are amortized into an expense account called amortization. Tangible assets are instead written off through depreciation. The amortization process for corporate accounting purposes may differ from the amount of amortization used for tax purposes.

What is the family attribution rule?

Family attribution rules. An individual is treated as owning any interest that’s owned. by the individual’s spouse, children, grandchildren or parents. • A spouse’s interest is attributed to the other spouse.

What is the difference between indirect and constructive ownership?

Example: Your corporation owns another corporation. You are the indirect owner of that second corporation. Constructive ownership means you are closely related to the real owner — so closely, in fact, that the IRS thinks you should be treated like a owner, even if you are not one in real life.