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Organizational costs election statement (descri- bed later) to your return. For start-up or organizational costs paid or incurred after September 8, 2008, an accompa- nying statement isn't required. Generally, for start-up or organizational costs paid or incurred before September 9, 2008, and after October 22, 2004, unless you choose to apply Regula- tions sections 1.195-1, 1.248-1, and 1.709-1, you also must attach an accompanying state- ment to elect to amortize the costs. If you have both start-up and organizational costs, attach a separate statement (if required) to your return for each type of cost. See Starting a Business, earlier, for more information. Generally, you must file the return by the due date (including any extensions). However, if you timely filed your return for the year without making the election, you can still make the elec- tion by filing an amended return within 6 months of the due date of the return (excluding exten- sions). For more information, see the instruc- tions for Part VI of Form 4562. You can choose to forgo the election to am- ortize by affirmatively electing to capitalize your start-up or organizational costs on your income tax return filed by the due date (including exten- sions) for the tax year in which the active trade or business begins. Note. The election to either amortize or capitalize start-up or organizational costs is ir- revocable and applies to all start-up and organi- zational costs that are related to the trade or business. If your business is organized as a corpora- tion or partnership, only the corporation or part- nership can elect to amortize its start-up or or- ganizational costs. A shareholder or partner can't make this election. You, as a shareholder or partner, can't amortize any costs you incur in setting up your corporation or partnership. Only the corporation or partnership can amortize these costs. However, you, as an individual, can elect to amortize costs you incur to investigate an inter- est in an existing partnership. These costs qual- ify as business start-up costs if you acquire the partnership interest. Start-up costs election statement. If you elect to amortize your start-up costs, attach a separate statement (if required) that contains the following information. • A description of the business to which the start-up costs relate. • A description of each start-up cost incur- red. • The month your active business began (or was acquired). • The number of months in your amortization period (which is generally 180 months). Filing the statement early. You can elect to amortize your start-up costs by filing the statement with a return for any tax year before the year your active business begins. If you file the statement early, the election becomes ef- fective in the month of the tax year your active business begins. Revised statement. You can file a revised statement to include any start-up costs not in- cluded in your original statement. However, you can't include on the revised statement any cost you previously treated on your return as a cost other than a start-up cost. You can file the re- vised statement with a return filed after the re- turn on which you elected to amortize your start-up costs. Organizational costs election statement. If you elect to amortize your corporation's or part- nership's organizational costs, attach a sepa- rate statement (if required) that contains the fol- lowing information. • A description of each cost. • The amount of each cost. • The date each cost was incurred. • The month your corporation or partnership began active business (or acquired the business). • The number of months in your amortization period (which is generally 180 months). Partnerships. The statement prepared for a cash basis partnership also must indicate the amount paid before the end of the year for each cost. You don't need to separately list any part- nership organizational cost that is less than $10. Instead, you can list the total amount of these costs with the dates the first and last costs were incurred. After a partnership makes the election to amortize organizational costs, it can later file an amended return to include additional organiza- tional costs not included in the partnership's original return and statement. Getting a Lease If you get a lease for business property, you may recover the cost of acquiring the lease by amortizing it over the term of the lease. The term of the lease for amortization purposes gen- erally includes all renewal options (and any other period for which you and the lessor rea- sonably expect the lease to be renewed). How- ever, renewal periods aren't included if 75% or more of the cost of acquiring the lease is for the term of the lease remaining on the acquisition date (not including any period for which you may choose to renew, extend, or continue the lease). For more information on the costs of getting a lease, see Cost of Getting a Lease in chapter 3. How to amortize. Enter your deduction in Part VI of Form 4562 if you are deducting amortiza- tion that begins during the current year, or on the appropriate line of your tax return if you aren't otherwise required to file Form 4562. Section 197 Intangibles Generally, you may amortize the capitalized costs of “section 197 intangibles” (see Section 197 Intangibles Defined, later) ratably over a 15-year period. You must amortize these costs if you hold the section 197 intangibles in con- nection with your trade or business or in an ac- tivity engaged in for the production of income. You may not be able to amortize sec- tion 197 intangibles acquired in a trans- action that didn't result in a significant change in ownership or use. See Anti-Churning Rules, later. Your amortization deduction each year is the applicable part of the intangible's adjusted basis (for purposes of determining gain), fig- ured by amortizing it ratably over 15 years (180 months). The 15-year period begins with the later of: • The month the intangible is acquired, or • The month the trade or business or activity engaged in for the production of income begins. You can't deduct amortization for the month you dispose of the intangible. If you pay or incur an amount that increases the basis of an amortizable section 197 intangi- ble after the 15-year period begins, amortize it over the remainder of the 15-year period begin- ning with the month the basis increase occurs. You aren't allowed any other depreciation or amortization deduction for an amortizable sec- tion 197 intangible. Tax-exempt use property subject to a lease. The amortization period for any section 197 in- tangible leased under a lease agreement en- tered into after March 12, 2004, to a tax-exempt organization, governmental unit, or foreign per- son or entity (other than a partnership), shall not be less than 125% of the lease term. Cost attributable to other property. The rules for section 197 intangibles don't apply to any amount that is included in determining the cost of property that isn't a section 197 intangi- ble. For example, if the cost of computer soft- ware isn't separately stated from the cost of hardware or other tangible property and you consistently treat it as part of the cost of the hardware or other tangible property, these rules don't apply. Similarly, none of the cost of acquir- ing real property held for the production of rental income is considered the cost of good- will, going concern value, or any other section 197 intangible. Section 197 Intangibles Defined The following assets are section 197 intangibles and must be amortized over 180 months. 1. Goodwill. 2. Going concern value. 3. Workforce in place. 4. Business books and records, operating systems, or any other information base, in- cluding lists or other information concern- ing current or prospective customers. 5. A patent, copyright, formula, process, de- sign, pattern, know-how, format, or similar item. CAUTION ! Page 30 Chapter 8 Amortization