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Amortization versus depreciation

I was reading through a document that referenced an old FCC ruling with regard to ordering telephone companies to abandon claims of ownership of inside wiring and how the abandoned wire became owned by the building owner or subscriber, depending on state property law.

FCC said there was a 10-year AMORTIZATION schedule, although these schedules could be changed upon petition. After fully AMORTIZED, the telco was ordered to abandon ownership claims.

I think of amortization being related to intangible assets and depreciation being related to tangible assets, so what am I missing? Is there a physical asset that gets amortized rather than depreciated because it has no salvage value when it's no longer usable?

Amortization always has a straight-line schedule; that's not always the case with depreciation.

What am I missing here?

Reply to
Adam H. Kerman
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IO always thought they were synonyms, but you piqued my curiosity.

which I found by a Google search for "amortization vs depreciation site:irs.gov" (without quotes):

"Depreciation is the annual deduction that allows you to recover the cost or other basis of your business or investment property over a certain number of years. Depreciation starts when you first use the property in your business or for the production of income. It ends when you either take the property out of service, deduct all your depreciable cost or basis, or no longer use the property in your business or for the production of income.

"Generally, you can depreciate:

" * Tangible property such as buildings, machinery, vehicles, furniture, and equipment; and

  • Intangible property such as patents, copyrights, and computer software. "Exception. You cannot depreciate land.

"Amortization is similar to the straight line method of depreciation in that an annual deduction is allowed to recover certain costs over a fixed time period. You can amortize such items as the costs of starting a business, goodwill, and certain other intangibles. See the instructions for Part VI."

The instructions for Part VI list among the costs you can amortize "A patent, copyright, formula, process, design, pattern, know-how, format, or similar item". But patents and copyrights were listed in Definitions as property you can _depreciate_. I'm stumped.

Reply to
Stan Brown

Goodness. That appears to be an error. However, maybe that section of the Internal Revenue Code conflates depreciation and amortization contrary to accounting concepts.

Reply to
Adam H. Kerman

There is no error - this is taxes, conflation is not an issue to be concerned with!

Amortization is straight line. Depreciation may be more rapid. Some tax code change allowed depreciation of certain intangibles for the more rapid deduction allowed.

I think.

Reply to
Taxed and Spent

According to one definition, intengible property is amortized, tangible property is depreciated. I guess the distinction is that tangible property gets worn out over time. Intangible property doesn't wear out, it just fades away.

Reply to
Stuart O. Bronstein

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