Mortgage Amortization Schedules

For mortgage amortization schedules government-granted rights consist of any license, permit or other right granted by a governmental unit, agency or instrument thereof, even if the right is granted for an indefinite period or if the right is reasonably expected to be renewed for an indefinite period. Covenants not-to-compete include any covenant not to compete or other arrangement to the extent that the arrangement has substantially the same effect as a covenant not-to-compete made in connection with the direct or indirect acquisition of an interest in a trade or business.

An interest in a trade or business for purposes of this section not only includes the assets of a trade or business but also stock in a corporation engaged in a trade or business. Franchises, trademarks and trade names are included in Section 197 assets. The term franchise is defined by Section 1253(b)(1) to include any agreement that provides one of the parties to the agreement the right to distribute, sell, or provide goods, services, or facilities within a specified area. Section 197 does not apply to contingent serial payments made due to a transfer of a franchise, trademark or trade name, since these payments are deductible when paid or incurred under Section 1253.

Certain assets are specifically excluded from being a Section 197 intangible. Among the assets excluded from Section 197 are * Financial interests

* Land

* Certain computer software

* Certain interests or rights acquired separately

Financial interests are any interest in a corporation, partnership, trust or estate, and interests under an existing futures contract, foreign currency contract, notional principle contract or other similar financial contract. Excluded from Section 197 asset status is any computer software which is readily available for purchase by the general public, subject to a nonexclusive license and which has not been substantially modified. Other computer software which is not acquired in a transaction, or series of related transactions, involving the acquisition of assets constituting a trade or business or a substantial portion thereof is excluded from Section 197 treatment.

If a depreciation deduction is allowed with respect to any computer software, then it is not a Section 197 intangible and the deduction is to be computed by using the straight line method and a useful life of 36 months. If the primary purpose of an acquisition is to obtain computer software, the taxpayer should consider buying just the software and not the seller's entire business to achieve the most rapid amortization of the software.

Certain other interests or rights that are acquired separately are excluded from Section 197 intangibles. Included among these rights and interests are the following:

* Interests in a film, sound recording, video tape, book or similar property

* Rights to receive tangible property or services under a contract or granted by a governmental unit, agency or instrumentality thereof

* Any interest in a patent or copyright

* To the extent provided in the regulations, any right under a contract or granted by a governmental unit, agency or an instrumentality thereof if such right has a fixed duration of less than 15 years or is fixed as to amount and, without regard to this section, would be recoverable under a method similar to the unit-of-production method.