I own a Patent personally and I've been advised to sell it on an installment sale to a new LLC I am forming, which would allow me to be taxed at capital gains rates as I receive the installment payments from the LLC.
I've been advised if instead of selling the Patent, I contribute it to the LLC, that I will lose out on the ability to pay taxes
at capital gains rates.
My plan is to own 80% of the interest in the LLC, with my Mom and Sister each owning 10%. My plan is to have the LLC taxed as a Partnership, on a calendar tax year, and be member managed with me as the Manager.
I've read Chapter 1235 "Patent Holder Exception", and Section 267 "...Related Taxpayers", and Section 707, "Transactions
between partner and partnership" several times. While I don't see an exact prohibition on me getting capital gains treatment on this installment sale according to the LLC as I plan to structure it, the specific prohibitions I see are "all around" the structure I am contemplating.
So my question is, "Can I receive the income from this installment sale as a captial gain?"