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posted Jan 20, 2025 3:01:54 PM

1099 misc box 3 as a buyer of intangible assets

i am buying a book of clients from another w2 employee as a w2 employee myself and a 1099 misc will be generated with box 3 checked.  as the buyer of what may be considered intangible assets, will this total purchase price be deductible to me or over time?  will i have to pay any self employment tax on this purchase?

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Expert Alumni
Jan 20, 2025 3:16:24 PM

Perhaps it will be deducted over time, depending on your circumstances. 

 

An established customer list would be a purchase of goodwill. If you are buying this for use as a self employed business, then it would be the same as buying a 'customer list'. This would be considered as a Section 197 Intangible as Goodwill.

 

This deduction would be amortization over 15 years.  This means the same amount is deducted each year, except for the first and last year. In those years, the amount is reduced for the actual number of months owned.

If you do not have a business, there is no deduction for employee business expenses since the  Tax Cuts and Jobs Act (TCJA) of 2017. Currently, this tax law still applies for employees.