Question

On May 5 of the current tax year, Byrne purchased a patent that qualifies as a § 197 intangible. The cost of the patent was $207,000 and Byrne is a calendar-year taxpayer. In the current tax year, how much of the patent’s cost may Byrne amortize?

a. $1,150.
b. $4,600.
c. $9,200.
d. $13,800.
e. None of the above.

Answer 1

C) $9,200

Step-by-step explanation:

A § 197 intangible patent may be amortized using a straight line basis over 180 months (15 years). Since he bought the patent during May, he can amortize 8 months (May to December).

amortization for the year = ($207,000 / 180 months) x 8 months = $1,150 per month x 8 months = $9,200