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Goodwill Hunting Gone Bad: Tax Law ’S Outmoded Treatment Of Goodwill, Mitchell L. Engler

Articles

Goodwill reflects the positive consumer association with a business. Goodwill thus overlaps with trademarks and other related assets. This close association impedes the separation of goodwill value from such related assets. Difficulties thus arise when the tax law treats goodwill more (or less) favorably than related intangible assets.For instance, the tax law previously denied any depreciation deductions for goodwill. Business buyers thus often allocated their costs away from goodwill and towards related assets like depreciable customer lists. The IRS responded with the initial “goodwill hunting” wave, challenging taxpayers’ low goodwill valuations. Congress addressed this litigious area in 1993 with new, …