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Abstract
New Section 197 provides for the amortization of goodwill, trademarks, and other intangibles over a 15-year period. Section 197 is of particular interest to banks because it specifically applies to deposit base and similar items and, in certain circumstances, mortgage-servicing rights. Section 197(f)(1) limits a taxpayer's ability to recognize a loss with respect to certain Section 197 intangibles. Section 197(f)(7) provides that amortizable Section 197 intangibles are treated as depreciable property for purposes of the income tax rules. With the addition of Section 197, the residual method for allocating basis in asset acquisitions no longer makes sense because goodwill is just one of many items treated as 15-year property. Congress recognized that Section 197 could have been manipulated to provide a significant advantage to taxpayers holding otherwise unamortizable goodwill, so the section includes some fairly complicated antichurning rules to prevent taxpayers from converting unamortizable goodwill into goodwill with a 15-year useful life.