IRS Reverses Position on Eligibility of Intangibles for Like-Kind Exchange Treatment

The IRS Office of Chief Counsel has announced a change in its position on the use of certain intangible property in IRC § 1031 like-kind exchanges (CCA 200911006).


Previously (in Technical Advice Memorandum 200602034 and Field Attorney Advice 20074401F) the IRS had decided that registered trademarks, trade names, newspaper mastheads, advertiser accounts, and subscriber accounts could not be property of like kind to similar intangible assets because such intangibles are too closely related to the going-concern value or goodwill of the business.


However, the Chief Counsel’s Office has now more closely analyzed the Supreme Court’s decision in Newark Morning Ledger Co. v. U.S., 507 U.S. 546 (1993), to conclude that if such intangibles can be separately described and valued apart from goodwill, then they can qualify as like-kind property under section 1031.


The Newark Morning Ledger case had held that an intangible asset is not goodwill for purposes of the depreciation rules if it can be separately described and valued apart from goodwill. The IRS has decided that this analysis should also apply to like-kind exchanges and it will no longer follow TAM 200602034 or FAA 20074401F.



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