[startupcfo]

See question #1880 in MCQ

QUESTION: On January 2, Year 1, Shaw Corp., an accrual-basis, calendar-year C corporation, purchased all the assets of a sole proprietorship, including $300,000 in goodwill. Federal income tax expense of $110,100 and $7,500 for impairment of goodwill were deducted to arrive at Shaw’s reported book income of $239,200. What should be the amount of Shaw’s Year 1 taxable income, as reconciled on Shaw’s Schedule M-1 of Form 1120, U.S. Corporation Income Tax Return?

The answer proposed amortizing 300K in goodwill over 15 years = to get a 20K deduction each year.

I thought that intangible assets could only be amortized if they had a finite life (patent for example), so therefore Goodwill could NOT be amortized?

AUD - 93
BEC - 87
FAR - 77
REG - 77

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Corporate finance leader

BEC - 87 | 02/28
REG - 70 | 06/10, REMATCH | 08/30
AUD - XX | 09/10
FAR - XX | 12/10

[Anonymous]

Dont Mix up with Financial vs. Tax. For tax purposes, you need to amortize..additional $12,500(20,000-7,500)

[Author]

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