Certified Valuation Analyst (CVA) Practice Exam

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Which IRS pronouncement introduced the concept of Goodwill?

RR 68-609
ARM 34
RR 98-34
IRS Rev Proc 2006-30

The correct answer is: ARM 34

The introduction of the concept of Goodwill in IRS pronouncements is attributed to Revenue Ruling 68-609. This ruling provides guidelines on the treatment of Goodwill in business valuations and highlights the distinction between identifiable intangible assets and unidentifiable ones, such as Goodwill itself. It establishes Goodwill as the excess value that a business possesses beyond its identifiable assets, which can arise from factors such as brand reputation, customer relationships, and employee skills. Revenue Ruling 68-609 has played a significant role in shaping how Goodwill is understood and assessed in various valuation contexts, particularly in the realm of taxation and estate planning. Understanding this concept is essential for the Certified Valuation Analyst Exam as it directly relates to the valuation of businesses and compliance with IRS guidelines about intangible assets.