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I sold an intangible asset held for > 1 year Copyrights

Hi, I sold an...

Hi, I sold an intangible asset held for > 1 year Copyrights Trying to figure out where exactly to report it

Accountant's Assistant: The Accountant will know how to help. Please tell me more, so we can help you best.

It's a copyright sale for a logo. So it needs to be reported on Form 4797

Accountant's Assistant: Is there anything else important you think the Accountant should know?

It was held for >1 year before selling. So I want to make sure it gets taxed at long-term capital gains. It was sold by a business (S-corp.) so the 4797 will be filed with the 1120S and flow through to me on the K1

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Answered in 6 minutes by:
2/16/2018
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 32,985
Experience: Taxes, Immigration, Labor Relations
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If that is an officially registered copyright - then - yes - the gain will be taxed as long term capital gain when held more than a year.

If that is an asset used in your business operations - report such sale on form 4797.

The gain will be classified as section 1231 gain and will be passed to shareholders on K1.

If copyrights were not registered - it will be classified as self-created intangible - and teh gain will be reported as ordinary income.

Questions?

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Customer reply replied 4 months ago
But IRS instructions clearly state that copyrights are not 1231: https://www.irs.gov/instructions/i4797
Copyright was not registered but was in force because the logo was used as a trademark in practice. The logo and all associated rights were sold.
Customer reply replied 4 months ago
But IRS instructions for form 4797 clearly state that copyrights are not 1231.
Copyright was not registered but was in force because the logo was used as a trademark in practice. The logo and all associated rights were sold.

copyrights are classified as section 197 intangible property.

If self-created - it is non-amortizable section 197 asset.

If not officially registered as a trademark - the gain is reported as ordinary income.

Sorry if you expected differently.

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Customer reply replied 4 months ago
it is section 197 and not section 1231? How would it be reported on 4797?
Would the reporting be different if it was registered?

section 1231 determines the character of the gain

but section 197 determines the character of the property.

These are different things...

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Customer reply replied 4 months ago
The main question is where to report it on 4797 -- part 1, 2 or 3? Assuming it was registered. How will it work its way to personal long-term gain?

If that is self-created section 197 intangible - and asset was used in business operation - the sale is reported on form 4797 Part II

If that is a self-created section 197 intangible which represents registered trademark, patent, etc - and which was held more than a year - the sale is reported on form 4797 Part I

Lev
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Customer reply replied 4 months ago
From 4797 how does it work its way through to K1 and Sched D? i.e., which sections and forms are involved?

from

form 4797 -->> on K1 line 7 -- >> schedule D -->> form 1040 line 13

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Customer reply replied 4 months ago
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