The IRS had previously issued Technical Advice Memorandum (TAM) 200602034, which concluded that the registered trademarks and trade names of a business entity could not be of like kind to the trademarks and trade names of another business entity because they were "closely related to (if not a part of) the goodwill or going concern value of a business." Under Regulation § 1.1031(a)-2(c)(2), the goodwill or going concern value of a business is not of like kind to the goodwill or going concern value of another business.

Using the rationale set forth in TAM 200602034, the IRS later issued Field Attorney Advice (FAA) 20074401F, which concluded that (like the trademarks and trade names discussed in TAM 200602034) newspapers' mastheads, advertiser accounts and subscriber accounts were closely related to (if not a part of) the goodwill and going concern value of the newspapers, and therefore were not of like kind under Regulation § 1.1031(a)-2(c)(2).  In reaching the conclusion, the FAA reasoned that Newark Morning Ledger Co. v. U.S., 507 U.S. 546 (1993), which holds that an intangible asset is not goodwill for purposes of the depreciation rules if it can be separately described and valued apart from goodwill, is not relevant to the determination of whether intangibles are of like-kind under § 1031.

In a March, 2009, legal memorandum, the IRS reversed its position. In ILM 200911006, the IRS states that it has concluded that the analysis of Newark Morning Ledger Co. does apply in determining whether intangibles constitute goodwill or going concern value within the meaning of Regulation § 1.1031(a)-2(c)(2). Accordingly, intangibles such as trademarks, trade names, mastheads, and customer-based intangibles that can be separately described and valued apart from goodwill can, in fact, qualify as like-kind property under § 1031 (provided the properties satisfy the other requirements of § 1031 including the nature and character rules of Regulation § 1.1031(a)-2(c)(1)).  The IRS also states that, in the IRS’s opinion, except in rare and unusual situations, intangibles such as trademarks, trade names, mastheads, and customer-based intangibles can be separately described and valued apart from goodwill.    Accordingly, the IRS will not follow the position in TAM 200602034 and FAA 20074401F on this issue.

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