top of page
Search

TAX IMPLICATIONS OF GOODWILL

Here’s a primer to help you avoid confusion about goodwill:


• As the seller, you have self-created goodwill when the total sales price of your business exceeds the fair market value of its assets, both tangible and intangible.

• You have acquired goodwill when you purchase the assets of another company for more than the value of its tangible and intangible assets.


Self-created goodwill is a capital asset because the law doesn’t specifically exclude it from being a capital asset. Thus, your sale of self-created goodwill produces tax-favored capital gain.


Acquired goodwill is an amortizable Section 197 intangible. You recover its cost in equal monthly amounts over 15 years. When you sell the acquired goodwill, it’s a Section 1231 asset if you held it for more than one year, which means you qualify for the best of all tax worlds:


• If you have a net gain, it is a long-term capital gain.

• If you have a net loss, it is an ordinary loss.



7 views0 comments

Recent Posts

See All

Health Insurance for S Corporation Owners: An Update Here’s an update on the latest developments in 2023 health insurance for S corporation owners. As a more-than-2-percent S corporation owner, you ar

Thank you to everyone who has scheduled and uploaded their documents in a timely fashion for this year's tax season. FX Cassidy & Associates appreciates your patronage and loyalty over the years. We

bottom of page