Intangible property is property without a physical existence (Cornell Law School, Legal Information Institute). The IRS applies the same test in its depreciation guide, where intangible property is property that has value but cannot be seen or touched, such as goodwill, patents, copyrights and computer software (IRS, Publication 946, 2025).
The property on the other side of that line is worked through at tangible assets.
Property and Intangible Asset Name Two Different Sets
The two terms get used interchangeably, and the sets they name do not line up.
A share of stock and a bond are intangible property, because the paper is only an embodiment of the right (Cornell Law School, Legal Information Institute). Neither is an intangible asset in US financial reporting, because that defined term lifts financial assets out before its own test runs, since an intangible asset is an asset, not including a financial asset, that lacks physical substance (FASB Statement No. 141(R), paragraph 3(l)). What sits in the class being lifted out is at financial assets.
A second group is left off the books for a different reason. A firm’s own reputation, the client goodwill it builds itself and the skill of its trained staff never reach its own balance sheet, because the costs of internally developing, maintaining or restoring intangible assets, goodwill included, that are not specifically identifiable, that have indeterminate lives, or that are inherent in a continuing business and related to an entity as a whole are recognized as an expense when incurred (FASB Statement No. 142, paragraph 10). None of that stops goodwill being intangible property on the tax side, where it is defined as an intangible property that is not confined to a name but can also be attached to a list of customers or to other elements of value in business as a going concern (IRS, Publication 946, 2025). Which nonphysical items reach a balance sheet, and the tests that decide, are set out at intangible resources examples.
Where the Classification Bites in a Firm’s Work
On a US return the label decides how the cost is recovered and how a gain is characterized, and the recovery route is not the one the physical test would suggest.
Amortization is the ratable deduction for the cost of intangible property over its useful life (IRS, Publication 946, 2025). Where Internal Revenue Code section 197 reaches an acquired intangible that route is exclusive, because except as provided in the section’s own amortization rule, no depreciation or amortization deduction is allowable with respect to any amortizable section 197 intangible (26 U.S. Code section 197(b)). Section 197(a) sets the clock, amortizing the adjusted basis of the intangible ratably over the 15-year period beginning with the month in which it was acquired, and goodwill in business carries it.
Outside that list the answer changes. Intangible property that is not a section 197 intangible may be depreciated when it meets the ordinary requirements for depreciable property, usually under the straight line method, while intangible property that is a section 197 intangible cannot be depreciated at all (IRS, Publication 946, 2025). So the line that decides the route is the section 197 list, not the absence of physical substance.
Character on the way out is decided separately again, because an amortizable section 197 intangible is section 1245 property (26 CFR 1.197-2(g)(8)), the class set out at section 1245 property.
Common Questions
Patents and patent applications, trade names, trademarks and service marks, copyrights and trade secrets are the standard examples, and stocks, bonds and certificates belong on the list too, since the paper is only an embodiment of the right (Cornell Law School, Legal Information Institute).
No count is fixed. The business combinations standard groups its examples of identifiable intangible assets under five headings, marketing-related, customer-related, artistic-related, contract-based and technology-based, and states that the examples are not intended to be all-inclusive (FASB Statement No. 141(R), paragraphs A29 to A56). Those classes and the tests behind them are worked through at intangible resources examples.
Accountably places trained offshore accountants and tax preparers inside US CPA and EA firms, and a firm can put a block of its own basis and amortization work through a trial task before more of the workload follows.
