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Property that May Not be Depreciated

Certain types of property must be amortized rather than depreciated. Other types of property may neither be depreciated nor amortized.

You must amortize section 197 intangibles:

  • Section 197 of the Internal Revenue Code applies to assets acquired in connection with the purchase of a business. Their cost must be amortized over 15 years. For example, goodwill, customer lists, patents, copyrights, and formulas.

Items that may not be depreciated:

  • Trademarks and trade names may not be depreciated unless:
    • They were acquired as part of the purchase of a business they would be classified as section 197 intangibles and their cost may be amortized over 15 years.
  • Property purchased and sold in the same year:
    • You must hold property purchased for your business more than one year to claim depreciation on such property. 
      • In addition to the over-one-year holding period, the property intended for use in your business must be BOTH ready and available for use to be eligible for depreciation. This is true even if the property is not actually used in the tax year it was purchased ready and available for use.
  • Land may never be depreciated
  • Antiques are generally not depreciable since they have no determinable useful life.
    • However, an antique actually used in the business may be depreciated because of wear and tear. For example, a desk or a musical instrument use by a professional musician.

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