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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 28084
Experience:  Taxes, Immigration, Labor Relations
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I HAVE A CLIENT THAT SOLD INTELLECTUAL PROPERTY TO GOOGLE.

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I HAVE A CLIENT THAT SOLD INTELLECTUAL PROPERTY TO GOOGLE. THIS WAS PATENTED PROPERTY THAT WAS DEVELOPED OVER SEVERAL YEARS. WHAT IS THE PROPER TAX TREATMENT AND HOW DO I SHOW THIS ON SCHEDULE D.

LEV :

Hi and welcome to Just Answer!


Patents are generally classified as section 197 intangibles.
The transfer of a patent by an individual is treated as a sale or exchange of a capital asset held longer than 1 year. This applies even if the payments for the patent are made periodically during the transferee's use or are contingent on the productivity, use, or disposition of the patent.


This treatment applies to your transfer of a patent if you meet all the following conditions.


 


•You are the holder of the patent.


 


•You transfer the patent other than by gift, inheritance, or devise.


 


•You transfer all substantial rights to the patent or an undivided interest in all such rights.


 


•You do not transfer the patent to a related person.
Depending if that patent was used in business - the sale transaction is reported on form 4797 or 8949.


LEV :

If the patent was not used in business - you will report the sale transaction and calculate your capital gain - you would need to report the sale transaction on form 8949 - Part II - check teh box "C" - and then - you will transfer results to schedule D. Here is this form -http://www.irs.gov/pub/irs-pdf/f8949.pdf

Customer:

SO AS LONG AS THE PATENTS HAVE EXISTED FOR OVER A YEAR THEY WOULD GET LONG TERM CAPITAL GAINS TREATMENT.

Customer:

ARE THEIR ANY TIPS ON NAMING OR CLASSIFYING THIS SALE.

LEV :

In case of patents - that will be a long term capital gain REGARDLESS how long patent was owned - as long as all listed requirements are met.

LEV :

I suggest to mentions patent and its ID in description.

Customer:

WHAT ARE THE LISTED REQUIREMENTS

LEV :

This treatment applies to your transfer of a patent if you meet all the following conditions.
•You are the holder of the patent.
•You transfer the patent other than by gift, inheritance, or devise.
•You transfer all substantial rights to the patent or an undivided interest in all such rights.
•You do not transfer the patent to a related person.

Customer:

THANKS

Lev and 2 other Tax Specialists are ready to help you
Customer: replied 3 years ago.


WHY THE FOLLOW UP?


 


I ALSO ASKED A TAX PROFESSIONAL.

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