15 Pages Posted: 31 May 2012
Date Written: May 21, 2012
Under current law, a taxpayer may amortize the cost of intangibles acquired in the taxable acquisition of a business over a composite life of 15 years. The 15-year period is too short. .A 75-year period would reflect the economic income of the acquirer and make the tax accounting consistent with debt financing. A 15-year life reduces the effective tax rate on a taxable acquisition of intangibles to 16 percent, and with debt financing, the acquirer’s tax becomes negative, adding 19 percent of revenue to the value of the acquisition. There is no justification for a negative tax on acquisitions.
The proposal is offered as a part of the Shelf Project, a collaboration of tax professionals to develop proposals for raising revenue without a VAT or a rate increase. Shelf Project proposals raise revenue while also making the tax system more efficient and reducing deadweight loss.
Suggested Citation: Suggested Citation
Johnson, Calvin H., Extend the Tax Life for Acquired Intangibles to 75 Years (May 21, 2012). Tax Notes, Vol. 135, p. 1054, May 2012; The Shelf Project; U of Texas Law, Public Law Research Paper No. 221. Available at SSRN: https://ssrn.com/abstract=2070101