KEN KIRSCHENBAUM, ESQ
ALARM - SECURITY INDUSTRY LEGAL EMAIL NEWSLETTER / THE ALARM EXCHANGE
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How does tax code treat purchased alarm accounts
November 24, 2020
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How does tax code treat purchased alarm accounts
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Ken
            If a company buys a book of accounts does the buyer have to depreciate the contracts over 15 years?  That is not what I would think; maybe 5 years or the maximum remaining on each contract term
anon
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Response
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            Don’t shoot the messenger.  Here is Mitch Reitman’s response:
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Ken
            Assuming the alarm contracts are purchased in an arms-length transaction they are Section 197 assets and, like goodwill, have a 15 year life for tax purposes.  
            I think that they should be depreciated over a lesser term, and GAAP requires that they be amortized over the “Estimated life of the asset.”  However, the tax code makes no economic sense.  The IRS regards them as Section 197 assets and mandates that they be amortized straight line over 15 years.
Mitch Reitman 
Reitman Consulting Group
5408 Woodway Drive|Fort Worth, TX 76133 | 817-698-9999 o | 817-698-0009 f
http://www.reitman.us
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Ken Kirschenbaum,Esq
Kirschenbaum & Kirschenbaum PC
Attorneys at Law
200 Garden City Plaza
Garden City, NY 11530
516 747 6700 x 301
ken@kirschenbaumesq.com
www.KirschenbaumEsq.com