Amortization of Goodwill

[JohnH]

Prior to Aug 11, 1993, goodwill could only be amortized if a useful life could be determined, but the rules changed that year to allow for 15-year amortization under Sec 197. I'm trying to determine whether there was an option once the new rule went into effect.

I'm looking at a situation in which the previous preparer simply booked goodwill for a business purchased in Nov 1993 and left it on the balance sheet as an "Other Asset" with no amortization taken. The business closed in 2007 and the return hasn't yet been filed.

My question is, was the 15-year amortization mandatory? It matters because I now need to know if only the goodwill for 2 years can be written off in 2007 or if the entire original amount can be written off in 2007. (I probably should know this, but so far I'm drawing a blank)

[kcjenkins]

You can write it off using a 3115. Look at Rev. Proc. 2007-16 and §1.446-1(e). An automatic change is allowed if changing from an impermissible method to a permissible method. Also, in 1.446-1(e)(2)(ii)(d)(2), it states that a change in the treatment of an asset from non-depreciable or non-amortizable to depreciable or amortizable, or vice versa, is a change in method of accounting.