Discussion:Copyright fee - not to be amortized?

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Discussion Forum Index --> Basic Tax Questions --> Copyright fee - not to be amortized?

Discussion Forum Index --> Tax Questions --> Copyright fee - not to be amortized?

Woodstock (talk|edits) said:

8 December 2010
So, I always thought that the cost of a copyright had to be amortized over 15 years as Sec 197 intangible. Today, I was doing some research and came across the words "not self-created". I have a client who spent $15k on a copyright for something she created. She did not purchase a copyright from someone else's creation. So does this mean that her copyright is 100% deductible in the year she paid it? Thanks for your insight!

Tax Writer (talk|edits) said:

8 December 2010
Self-employed artists, composers, writers, musicians, etc are not subject to the capitalization/amortization rules that other businesses must follow. There is a special exception in the law for them. See IRC section 263A(h). This has been the rule since 1988.

If the copyright/trademark, etc is self-created, then it can be decucted immediately.

There is also a safe harbor rule outlined in Notice 88-62. The notice provides for a deduction of 50 percent of the cost in year one, and 25 percent in years two and three.

In order to qualify for this special treatment, the expense must be tied to the actual creative activity. A copyright is a legal protection for a written work, so it qualifies. The purchase of machinery, for example, would not.

Some good articles on the subject: [1]

[2]- this article by Cyn Mason is excellent

Tax Writer (talk|edits) said:

8 December 2010
By the way, registering a copyright usually costs $30. I think you need to ask the author what could have possibly cost 15K. It sounds like much more than a copyright, unless she was robbed.

Woodstock (talk|edits) said:

9 December 2010
Thanks Tax Writer for the info - totally helps! I think most of it was the attorney fees. Guess I'm in the wrong career. :)

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