I think of amortization being related to intangible assets and
depreciation being related to tangible assets, so what am I missing? Is
there a physical asset that gets amortized rather than depreciated
because it has no salvage value when it's no longer usable?
From the "Definitions" sectio0n of the instructions for form 4652,which I found by a Google search for "amortization vs depreciation site:irs.gov" (without quotes):
On Mon, 17 Jul 2023 21:25:30 EDT, Adam H. Kerman wrote:
I think of amortization being related to intangible assets and
depreciation being related to tangible assets, so what am I missing? Is >>there a physical asset that gets amortized rather than depreciated
because it has no salvage value when it's no longer usable?
IO always thought they were synonyms, but you piqued my curiosity.
From the "Definitions" sectio0n of the instructions for form 4652,
which I found by a Google search for "amortization vs depreciation >site:irs.gov" (without quotes):
"Depreciation is the annual deduction that allows you to recover the
cost or other basis of your business or investment property over a
certain number of years. Depreciation starts when you first use the
property in your business or for the production of income. It ends
when you either take the property out of service, deduct all your
depreciable cost or basis, or no longer use the property in your
business or for the production of income.
"Generally, you can depreciate:
" * Tangible property such as buildings, machinery, vehicles,
furniture, and equipment; and
* Intangible property such as patents, copyrights, and computer
software.
"Exception. You cannot depreciate land.
"Amortization is similar to the straight line method of depreciation
in that an annual deduction is allowed to recover certain costs over
a fixed time period. You can amortize such items as the costs of
starting a business, goodwill, and certain other intangibles. See the >instructions for Part VI."
The instructions for Part VI list among the costs you can amortize "A
patent, copyright, formula, process, design, pattern, know-how,
format, or similar item". But patents and copyrights were listed in >Definitions as property you can _depreciate_. I'm stumped.
Stan Brown <the_stan_brown@fastmail.fm> wrote:
On Mon, 17 Jul 2023 21:25:30 EDT, Adam H. Kerman wrote:
I think of amortization being related to intangible assets and
depreciation being related to tangible assets, so what am I missing? Is
there a physical asset that gets amortized rather than depreciated
because it has no salvage value when it's no longer usable?
IO always thought they were synonyms, but you piqued my curiosity.
From the "Definitions" sectio0n of the instructions for form 4652,
which I found by a Google search for "amortization vs depreciation
site:irs.gov" (without quotes):
"Depreciation is the annual deduction that allows you to recover the
cost or other basis of your business or investment property over a
certain number of years. Depreciation starts when you first use the
property in your business or for the production of income. It ends
when you either take the property out of service, deduct all your
depreciable cost or basis, or no longer use the property in your
business or for the production of income.
"Generally, you can depreciate:
" * Tangible property such as buildings, machinery, vehicles,
furniture, and equipment; and
* Intangible property such as patents, copyrights, and computer
software.
"Exception. You cannot depreciate land.
"Amortization is similar to the straight line method of depreciation
in that an annual deduction is allowed to recover certain costs over
a fixed time period. You can amortize such items as the costs of
starting a business, goodwill, and certain other intangibles. See the
instructions for Part VI."
The instructions for Part VI list among the costs you can amortize "A
patent, copyright, formula, process, design, pattern, know-how,
format, or similar item". But patents and copyrights were listed in
Definitions as property you can _depreciate_. I'm stumped.
Goodness. That appears to be an error. However, maybe that section of
the Internal Revenue Code conflates depreciation and amortization
contrary to accounting concepts.
Stan Brown <the_stan_brown@fastmail.fm> wrote:Is
On Mon, 17 Jul 2023 21:25:30 EDT, Adam H. Kerman wrote:
I think of amortization being related to intangible assets and >>>depreciation being related to tangible assets, so what am I missing?
there a physical asset that gets amortized rather than depreciated >>>because it has no salvage value when it's no longer usable?
IO always thought they were synonyms, but you piqued my curiosity.
From the "Definitions" sectio0n of the instructions for form 4652,
which I found by a Google search for "amortization vs depreciation >>site:irs.gov" (without quotes):
"Depreciation is the annual deduction that allows you to recover the
cost or other basis of your business or investment property over a
certain number of years. Depreciation starts when you first use the >>property in your business or for the production of income. It ends
when you either take the property out of service, deduct all your >>depreciable cost or basis, or no longer use the property in your
business or for the production of income.
"Generally, you can depreciate:
" * Tangible property such as buildings, machinery, vehicles,
furniture, and equipment; and
* Intangible property such as patents, copyrights, and computer
software.
"Exception. You cannot depreciate land.
"Amortization is similar to the straight line method of depreciation
in that an annual deduction is allowed to recover certain costs over
a fixed time period. You can amortize such items as the costs of
starting a business, goodwill, and certain other intangibles. See the >>instructions for Part VI."
The instructions for Part VI list among the costs you can amortize "A >>patent, copyright, formula, process, design, pattern, know-how,
format, or similar item". But patents and copyrights were listed in >>Definitions as property you can _depreciate_. I'm stumped.
Goodness. That appears to be an error. However, maybe that section of
the Internal Revenue Code conflates depreciation and amortization
contrary to accounting concepts.
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