Tax Policy

Amortizing Purchased Intangible Assets Gao ID: T-GGD-92-1 October 2, 1991

The tax treatment of intangible assets is one of the oldest controversies between taxpayers and the Internal Revenue Service (IRS). GAO's concerns with the current tax rules for the treatment of purchased intangible assets involve complexity and fairness issues. The rules are complex in application because they lack adequate standards for determining which purchased intangible assets can be amortized for tax purposes. This lack of clear guidance has resulted in different treatment of similarly situated taxpayers, improper measurement of taxable income for some taxpayers, and protracted conflicts between IRS and taxpayers. A recent report on this subject (GAO/GGD-91-88, Aug. 9, 1991) recommended that Congress amend current law to allow amortization of all purchased intangible assets, including goodwill, over specific statutory cost recovery periods.



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