Which of the Following Statements Concerning Business Goodwill Is False

question 39

Multiple Choice

Which of the following statements concerning business goodwill is false?

• A) If a business creates goodwill by developing a loyal customer base and generating brand name recognition, the tax basis in the goodwill is zero.
• B) When a taxpayer purchases a business and capitalizes the cost allocated to goodwill, the cost basis is not amortized for financial reporting purposes.
• C) When a taxpayer purchases a business and capitalizes the cost allocated to goodwill, the cost basis may be amortized over 15 years for tax purposes.
• D) The tax deduction for goodwill amortization is an unfavorable book/tax difference.

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Definitions:

Security Interest

A legal claim or right granted on property or assets as collateral to secure the performance of an obligation, such as repayment of a loan.

Federal Bankruptcy Exemptions

Specific exemptions provided by federal law that allow a debtor to protect certain types of property from being seized and sold off by creditors during the bankruptcy process.

Unsecured Creditors

Creditors who have extended credit without obtaining specific collateral, ranking below secured creditors in claims on assets.

Individual Retirement Account

A financial tool for individuals to save for retirement in a tax-advantaged way.