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This is an accounting technique, used for tax planning purpose, to periodically lower the book value of a loan or an intangible asset over a set period of years. This is accomplished by monthly lowering the intangible asset value on the balance sheet by a specific amount and charging that same amount to expense on the income statement. The amount of amortization taken as a non-cash charge in any given accounting period is almost always based upon number of years approved by the IRS for cost recovery. See also Depreciation, which is the corresponding accounting technique for tangible assets.

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