Do we report purchase of client accounts as Intangible Asset or Misc. Expense?

[SLS05]

Our landscape company purchased another landscape companys' maintenance accounts. Do I report this as an Intangible Asset or as a one-time Misc. Expense?

[TomYoung]

Certainly from a Generally Accepted Accounting Principles standpoint this would be considered the purchase of an intangible asset, and the IRS has a similar concept with specific rules as to what constitutes an intangible and the amortization of same.

This site covers the IRS's rules as to what intangibles are and the amortization: https://taxmap.irs.gov/taxmap/pubs/p535-042.htm

Tom Young

[SLS05]

Thank you TomYoung.
The purchase was a small amount, $1660, and we are both sole proprietors. We basically just bought a client list from a older man retiring. We don't want to depreciate it, so that's why I thought maybe it would be considered an expense.
I didn't think it fell in with the Amortizable Assets (goodwill, patents, copyrights, etc). and Other Intangible Assets just has a "warning" about being well versed in depreciation.
Does any of this info change your opinion?

[TomYoung]

What you purchased is generally called a "book of business" or "customer list" and falls squarely into one or the other or both of these items listed as intangibles:

"Business books and records, operating systems, or any other information base, including lists or other information concerning current or prospective customers."

"A customer-based intangible."

The amount does sound rather small and I'd guess you'd probably get away with expensing it as something or another, (you might even expense it on line 27a as "Customer list" - providing "full disclosure"), but technically, yeah it probably is an "intangible."