Article Date:
August 2018

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Q&A: Did Goodwill Take a Hit under Tax Reform?



There is a provision in the Tax Cuts and Jobs Act (TCJA) that amends Code Section 1221(a)(3) such that gains and losses from the sale of a patent, invention, model or design, or secret formula or process are ordinary income and not capital gain.


These are “self-created property,” which can apply to goodwill as well. I have heard some comments that there is a possibility that the sale of goodwill could now be ordinary income. If so, this change could create a large tax hit for S and C corporation owners selling the assets of the corporation versus selling the stock.


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