a mercantile or manufacturing conf the turnover of a business in conhe old customer's continuing." The n away from the older idea that good ng business, or solely to the name of cases stating: "Good Will, I apprege that has been acquired by the old whether connected with the premises usly carried on, or with the name of 'matter carrying with it the benefit

Dod will as an asset are :

-no fixed term of life.

e in value as a capital asset even though all, and though every expenditure tending ear as current expense.

ation or appreciation on the books of a

it is stated in a balance sheet being Cion of what it may have cost in the first sell good will on the basis of the book ted anew in case of sale.

from an investment in good will can be or a part of it to which the good will ceptional cases the loss may be charged obsolete).

euliarities, its treatment on the books from the accounting for patents, for artment has set down the following tion of this asset as affecting income

96

the business with which it is connected, is not ca (Par. 123, Reg. 33, Rev.)

"Any loss resulting from or on account of an can be determined only when the property or bus will attaches is sold or disposed of, in which case determined upon the basis of the value of the ass if acquired prior to March 1, 1913, or their cost to that date." (Art. 167, Reg. 33, Rev.)

B. REGARDING ATTEMPTED REDUCTION OF A DEPRECIATING GOOD WILL ON THE

The old rule was:

"For the purpose of income tax, good will depreciation nor appreciation. An amount claime in value is not an allowable deduction from gross tax liability of an individual or corporation."

(

'Good will' represents the value attached to a the value of the physical property, and is such an is not subject to wear and tear, and no claim for tion therewith can be allowed." (Art. 167, Reg.

"No deduction will be allowed for the deprecia marks, and trade brands." (Art. 168, Reg. 33, F These regulations were promulgated on Janu plied particularly to the Acts of September 8, 1917.

The more recent regulations, Reg. 45, promu set forth in Art. 163:

"DEPRECIATION OF INTANGIBLE PROPI use of which in a trade or business is definitely be the subject of a depreciation allowance. Ex copyrights, licenses and franchises. Intangibles,

ses dealing with distillers, brewers, ew status created by the enactment arently specify the treatment to be al cases.

liquors are entitled to make a deducFair market value as at March 1, 1913) of depreciation or obsolescence of their de-marks, trade-brands, etc., such deducassets, the value of which has been de1, and (2) in arriving at the taxable

ending on or after January 31, 1918, that date is to be allowed as a deducject to taxation under the Revenue Act n of such proportion of the remaining the interval between January 31, 1918, ar bears to the total interval between 16, 1920 (unless at an earlier date the s, in which case such earlier date shall nd (3) for any taxable year following to a deduction in respect of the value nuary 31, 1918, based upon a ratable

(T. B. R. 44. 15-19-445.)

e on account of depreciation or obsoood will, trade-marks and trade-brands, liquors, are also applicable to brewers."

Ded

Any method of appreciating the book value disregarded in calculating tax returns. Note A

"Only true earned surplus and undivided profit computation of invested capital, and if for any properly reflect the true surplus, such adjustn are necessary in order to arrive at the correct a

"The Committee is of the opinion that apprec part of earned surplus." (A. R. R. 71. 18-20-90 "Good will created to offset impaired capital r capital." (O. D. 182. 1-19-121.)

"Additions to capital invested representing re are not allowable." (O. D. 86. 1-19-125.)

Even correction of books to correct an unde in regard to intangibles, including good will. N

"(3) Amounts which have been expended in property of any kind can be restored to capital to the extent that the corporation specifically pa intangible property as such."

"A corporation acquiring with stock the asset ing corporation, among which assets are included etc., cannot claim as an addition to invested ca by the predecessor corporation for the genera intangibles and charged by it as current exp 3-19-206.)

Deducing from the above, it will be apparent was organized other than by purchase of an alr ness cannot create on the books the asset "Go course of its operations as a going concern, or, i is entered, it must be disregarded in calculating however, the business is sold, the actual asset valued and included in the sales price, where in the chapter on Valuation of om average yearly earnings over gnable to the use of the capital twenty per centum of the pres

the one which will most frequently e absence of data necessary for the s to allow out of average earnings ch 1, 1913, preferably not less than apon the average tangible assets for Il then be the average amount availthe intangible assets, and it is the eturn should be capitalized upon the purchase that is to say, five times intangibles should be the value of

iness, the changes in popular tastes Litation or counterfeiting of popular uine goods, the Committee is of the Der cent return on intangibles is not hat no higher figure than that be without a very clear and adequate angibles was in fact greater than formula.

y particularly to businesses put out , but will be equally applicable so d, to other businesses of a more or however, of valuation of good will e manufacture or sale of standard subject to violent fluctuations and Committee is of the opinion that the a on tangible assets might be reduced

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