Lesson: Amortization of Intangible Assets

In this lesson, Nick Palazzolo, CPA, dives into the intricacies of amortization for intangible assets. He explains the process of cost recovery for these non-physical assets, taking care to detail how the IRS dictates straight-line amortization over a 15-year period, regardless of the asset's actual useful life. Focusing particularly on business organization and startup costs, Nick makes it clear how these are differentiated from normal business expenses and the potential for immediate expensing, subject to certain limits and phase-outs. Further, he clarifies the treatment of stock issuance costs, illustrating they're not deductible and instead alter the proceeds from the issuance and the stock's basis for shareholders. Nick also discusses various intangible assets that require amortization using vivid examples, including goodwill, trademarks, and franchising rights. He emphasizes the standard 15-year amortization period for all these assets, pointing out common exam tricks and pitfalls. Each of the points is supported with practical examples and calculations, preparing you to tackle related questions with confidence.