 Most of this information comes from Publication 946, How to Depreciate Property Tax Year 2022. You can find it on the IRS website, irs.gov, irs.gov. Looking at the income tax formula, we're focused on line one income. Remember in the first half of the income tax formula is in essence and income statement, but just an outline of scaffolding, other forms and schedules flowing into it. For example, the schedule C, which is in essence an income statement in and of itself, business income minus business expenses, gives us the business net income would flow into line one income of our income tax formula. This is page one of a form 1040 where we can recognize that the schedule C would flow into the schedule one, which would flow into line eight of the form 1040. Schedule C profit or loss from business, income statement format, income minus expenses, we're focused here on the expenses, in particular those related to depreciable property where we have to deviate from a cashed based system, even if we're using a cashed based system, doing an accrual thing, putting these items on the books as an asset, allocating the cost or possibly amortizing the cost in the case of intangible assets over the useful life. Why? Because the tax code tells us that's what we have to do. All right, so patents and copyrights. These were the ones that were deviations, if you recall from prior presentations to the normal maker's rules. So most of the times when we talk about normal depreciable property, property, plants and equipment, equipment, for example, we put it on the books usually using maker's rules. Maker's rules is gonna be a format of double declining balance usually with like a half year convention or something like that. But we have exceptions with other types of depreciable items or amortizable items, intangible items oftentimes, like patents and copyrights. So if you can depreciate the cost of a patent or copyright, use the straight line method over the useful life. Now the straight line method is like the standard or baseline method when you're thinking about any kind of depreciation in concept. So in concept, we would think, okay, what is the useful life of my patent or copyright? Which is a type of intangible asset that is given through law. It's a legal kind of thing, right? That's why we have it. We've got restrictions in place that are legal restrictions. They're not physical, they're not tangible things, but they have value. And so we can basically think how long are these things going to last? They're gonna end at some point in time possibly. And so we can then try to take the value over the useful life. So if I bought, for example, a patent or a copyright, then I may have a good idea in that case in terms of how much I paid for it, obviously, which would hopefully be the market value. You would think if it was an orange length transaction, I know how long the patent or copyright might last. And therefore I can take the cost divided by the years that it's gonna be allocated to and then allocate the expense or amortization, depreciation over the life that I'm getting a benefit from that asset would be the general idea. Notice that when we get to the maker's depreciation and we look at accelerated depreciation methods, the idea would be that we're gonna get more depreciation in the first years than the latter years, which could make sense even from an accounting standpoint, not just a tax weirdness standpoint, because if it was equipment, you might get more benefit from the early years than the latter years. If you're talking like a patent or a copyright, that's not so true. You might get the same benefit going forward depending on what the patent or copyright is for, because if you didn't have the patent, that's when you would think you'd get all the benefit upfront until other people got into the market or something like that, right? So straight line kind of makes sense conceptually. But some reason we deviate from something that makes sense conceptually isn't always that it doesn't make sense conceptually from an accounting standpoint, like 179 deduction and special depreciation, for example, don't really make sense conceptually, that's the government doing something weird to stimulate the economy or something like that. So the useful life of a patent or a copyright is the lesser of the life granted to it by the government or the remaining life when you acquired it. However, so obviously if the government granted it and you got it from the start, then whatever the useful life is, when you bought it, clearly the life that is still remaining where the law is in place for the patent or copyright would be the useful life at the point in time you purchase it. However, if the patent or copyright becomes a value list before the end of its useful life, you can deduct it, you can deduct in that year any of its remaining costs or other bases. So that would be kind of similar to a situation where you had a piece of equipment, like we talked about in a prior presentation, which you disposed of because it's no longer useful, you just threw it away, you still had bases in it that you didn't fully depreciate. Similar situation here, you got a patent or copyright, it became useful, the patent or copyright became obsolete or something like that, you're not getting any value from it anymore, but you still have that basis that hadn't fully been depreciated. So you might have a situation where you think you'd get a benefit from it at the point in time that it becomes obsolete, considering you paid for it in the past and you're no longer allocating that cost to revenue in the future.