Goodwill on closed business

[WhiteOleander]

Taxpayer had purchased a business and was amortizing goodwill. In 2008, he closed the business. He did not sell the business or any equipment. The preparer of 2008 wrote off the remaining goodwill as a loss. Approx 20,000.00. He had owned the business for more than one year. This loss along with the loss on the Sch C of about 30,000.00 created a NOL for 2008. The preparer for that year did not do anything with the NOL. He did not carry it back or forward.

Now fast forward to 2012. Our office is preparing the 2012 return. He has a different business that has a net profit. He wants to go back and get the NOL from 2008 that was never used.

I believe that the goodwill was written off improperly. Since the business closed and did not sell, doesn't the amortization stop just like other depreciation? Or am I incorrect in that understanding? I didn't think a loss could be taken. Also, we would have to carryback the NOL 2006 and forward all the way to 2012. Not sure that would get the client anywhere.

Any thoughts would be appreciated.

[Burke]

I believe that the goodwill was written off improperly. Since the business closed and did not sell, doesn't the amortization stop just like other depreciation? Or am I incorrect in that understanding? I didn't think a loss could be taken. Also, we would have to carryback the NOL 2006 and forward all the way to 2012. Not sure that would get the client anywhere. Any thoughts would be appreciated.

According to Sect 195(b)(2), remaining amortization of start-up costs can be deducted upon termination of the business. I do not think it matters whether it was sold or just closed from what I read. I am not so familiar with all the ins and outs of NOLs, but you elect out of carry-back and then carry-forward only with a timely-filed election. In other words, it would have had to have been done by the due date including extensions of the 2008 return. Sect. 172(b)(3). In any event, 2008 is now a closed year and I am not sure how that will affect this situation. I think you will hear from others who deal with this more often, and I am interested as well in what they have to say.

[ChEAr$]

How was the goodwill "written off" back in 2008? Was it done correctly, as a capital loss? If so, no problem with any carryback, but carried forward maybe until used up.

[veritas]

The remaining goodwill

should have been fully taken in 2008 as a 1231 loss.

[WhiteOleander]

should have been fully taken in 2008 as a 1231 loss.

Yes, it was a 1231 loss from form 4797. But, there was an overall NOL for the year. The 1231 loss contributed to the NOL. I just wanted to make sure that the goodwill could be written off since the business closed and did not sell.
Thanks.