Glossary Amortization:A ratable deduction for the cost of certain intangible propertyover the period specified by law. Examples of costs that can beamortized are goodwill, agreement not to compete, and research andmining exploration costs. Business assets:Property used in the conduct of a trade or business, such asbusiness machinery and office furniture. Capital assets:Generally, everything you own for personal purposes or investmentis a capital asset. This includes your home, personal car, or stocksand bonds. It does not include inventory or depreciable property. Capital expenses:These are costs that must be added to (increase the basis of) yourbusiness investments or your capital assets. Capitalization:Adding costs, such as improvements, to the basis of assets. Depletion:Yearly deduction allowed to recover your investment in minerals inplace or standing timber. To take the deduction, you must have theright to income from the extraction and sale of the minerals or thecutting of the timber. Depreciation:Ratable deduction allowed over a number of years to recover yourbasis in property that is used more than one year for business orincome producing purposes. Fair market value (FMV):FMV is the price at which property would change hands between abuyer and a seller, neither having to buy or sell, and both havingreasonable knowledge of all necessary facts. Going concern value:Going concern value is the additional value of a trade or businessthat attaches to property because the property is an integral part ofa going concern. It includes value based on the ability of a businessto continue to function and generate income even though there is achange in ownership. Goodwill:Goodwill is the value of a trade or business based on expectedcontinued customer patronage due to its name, reputation, or any otherfactor. Intangible property:Property that cannot be perceived by the senses such as goodwill,patents, copyrights, etc. Like-class property:Depreciable tangible personal properties within the same GeneralAsset Class in Revenue Procedure 87-56 or Product Class in theStandard Industrial Classification Manual. SeePersonal property under Like Property in chapter1 of Publication 544 for detailed information. Like-kind property:Items of property with the same nature or character. The grade orquality of the properties does not matter. Examples are two vacantplots of land. Nonbusiness assets:Property used for personal purposes, such as a home or family car. Personal property:Property, such as machinery, equipment, or furniture, that is notreal property. Real property:Land and generally anything erected on, growing on, or attached toland, for example, a building. Recapture:Amount of depreciation or section 179 deduction that must bereported as ordinary income when property is sold at a gain. Section 179 deduction:This is a special deduction allowed against the cost of certainproperty purchased for use in the active conduct of a trade orbusiness. Section 197 intangibles:Certain intangibles held in connection with the conduct of a tradeor business or an activity entered into for profit, includinggoodwill, going concern value, patents, copyrights, formulas,franchises, trademarks, and trade names. Tangible property:This is property that can be seen or touched, such as furniture andbuildings. Unstated interest:The part of the sales price treated as interest when an installmentcontract provides for little or no interest.