$5000 Bonus Amortization?

[Harvey Lucas]

My client paid a franchise fee in Jan of 2008 for a Janitorial business.

He paid $10,000.

Indication is that it is a 197 intangible and is amortized over 15 years.

However, the software I use, Drake, has a check box on the input screen asking me if I want to elect "additional first year $5000 deduction"?

I dont find any reference to a $5000 bonus amorization deduction in TaxBook or in QF?

Does anyone know if this is allowable?

Thank You,
Harvey Lucas

[David1980]

Amortization Election, TTB 8-18.

[S T]

I don't believe so

See TTB SB5-16 right hand column

Says Special Depreciation - allows the taxpayer to expense 50% of the adjusted basis of "qualified property" placed in service during 2008, also applies for 2009.

Then further down is the Qualified Property. Property that qualifies for the 50% special allowance includes the following:

MACRS property with a recovery period of 20 years or less
Water Utility property
Computer software that is not a Section 197 intangile asset
Qualified Leasehold Improvement Property

I don't believe that a Franchise Fee is an Organizational or StartUp Cost, it is an intangible that must be amortized over 15 years. From Pub 535

Franchise, trademark, or trade name. A franchise, trademark, or trade name is a section 197 intangible. You must amortize its purchase or renewal costs, other than certain contingent payments that you can deduct currently. For information on currently deductible contingent payments, see chapter 11.

Sandy