Jack from Ohio Posted October 9, 2018 Report Share Posted October 9, 2018 Commercial fishing client in Washington State. Renewal of her commercial fishing license is $50K. This is for 10 years. My first reaction is that they can take it all as expense this year. However, since the license is for 10 years, does that prevent expensing it all in 2018? Extra information: They have proclaimed that this year was a very good fishing year, so the expense won't create a noticeable bump, in their expenses. Just wanting some more opinions. Quote Link to comment Share on other sites More sharing options...
Roberts Posted October 9, 2018 Report Share Posted October 9, 2018 section 197 intangible when you buy. I'd say it is amortized over the life of the license. 2 Quote Link to comment Share on other sites More sharing options...
Max W Posted October 9, 2018 Report Share Posted October 9, 2018 See section 8 https://www.law.cornell.edu/cfr/text/26/1.197-2 Amortize under Sec 197. 1 Quote Link to comment Share on other sites More sharing options...
Abby Normal Posted October 9, 2018 Report Share Posted October 9, 2018 https://www.irs.gov/businesses/small-businesses-self-employed/fishing-tax-center The term “section 197 intangible” is defined to include “any license, permit, or other right granted by a governmental unit or any agency or instrumentality thereof.” Thus, for example, the capitalized cost of acquiring from any person a liquor license, a regulated airline route, or a television or radio broadcasting license is to be amortized over a 15-year period. Consequently, the definition of an amortizable intangible can be interpreted to include a limited entry fishing permit. 1 Quote Link to comment Share on other sites More sharing options...
Abby Normal Posted October 9, 2018 Report Share Posted October 9, 2018 21 minutes ago, Roberts said: section 197 intangible when you buy. I'd say it is amortized over the life of the license. Very few things are amortized over their useful life. 197 intangibles is 15 years regardless, but you would have a balloon amount of amortization in the final year when it becomes worthless. 1 Quote Link to comment Share on other sites More sharing options...
Roberts Posted October 9, 2018 Report Share Posted October 9, 2018 13 minutes ago, Abby Normal said: Very few things are amortized over their useful life. 197 intangibles is 15 years regardless, but you would have a balloon amount of amortization in the final year when it becomes worthless. JMO but the cost of initially incurring the license (legal fees and so forth) would be 15 year. Would not the cost of the license itself be Sec 167 and amortized over the life of the intangible? The license itself has a set life expectancy. For example I wouldn't amortize my every three year EA license fee for 15 years with a lump sum in year 3. 2 Quote Link to comment Share on other sites More sharing options...
Abby Normal Posted October 9, 2018 Report Share Posted October 9, 2018 57 minutes ago, Roberts said: JMO but the cost of initially incurring the license (legal fees and so forth) would be 15 year. Would not the cost of the license itself be Sec 167 and amortized over the life of the intangible? The license itself has a set life expectancy. For example I wouldn't amortize my every three year EA license fee for 15 years with a lump sum in year 3. I think you're right, after reading Sec 167 & 1.197-2(c)(13) 1 Quote Link to comment Share on other sites More sharing options...
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