Bookmark
http://www.aicpa.org/pubs/taxadv/online/jul2005/clinic8.htm
JSTOR: Tax Consequences of Patent Transfers1951), the taxpayer transferred the right to manufacture, use and sell his .... there is a sale of the patent and any income realized is capital gain. http://www.jstor.org/pss/1226203
26 U.S. Code 1235 is the part of the U.S. tax code that deals with the sale or exchange of patents, and the key word here is "patents":
26 USC 1235 - Sale or exchange of patents
(a) General - A transfer (other than by gift, inheritance or
devise) of property consisting of all substantial rights to
a patent, or an undivided interest therein which includes a
part of all such rights, by any holder ...
... shall be considered the sale or exchange of a capital asset
held for more than 1 year, ...
... regardless of whether or not payments in the consideration
of such transfer are - (1) payable periodically over a period
generally coterminous with the transferee's use of the patent,
or (2) contingent on the productivity, use, or disposition of
the property transferred.
Sources:
The IRS Web page for deducting general R&D expenses (www.irs.gov/businesses/small/industries/article/0,,id=97640,00.html)
states:
R&D expenditures include the expenditures of obtaining a patent,
such as attorney's fees expended in the making and perfecting a
patent application.
Again, kind of implies equal treatment of patents and applications in the IRS' eyes.
Another IRS Web page also seems to suggest that patent applications fall under 1235. The Web page, "Ordinary or Capital Gain or Loss" covers capital gains in general (see www.irs.gov/publications/p544/ch02.html). As one example of when a capital asset transaction is not treated as a capital gain, the page states:
Depreciable property transaction. Gain on the sale or exchange
of property, including a leasehold or a patent application,
that is depreciable property in the hands of the person who
receives it ... is ordinary income if the transaction is either
directly or indirectly between any of the following pair of
entities: .... [basically, selling to an entity you mostly
control].
http://www.patentlawyer.com/library/biziptax.html
Capital Gains Treatment Upon Sale of the Technology
Sec. 1235 of the Internal Revenue Code allows a patent to have long term capital gain treatment even to a professional inventor, and regardless of holding period. With most properties it is required that the owner hold the property for a year in order to obtain capital gains treatment. With patents, an invention made on one day can be sold the next day and still receive capital gains treatment. The key to capital gains treatment is to be a "holder" as defined in the Internal Revenue Code. A holder can be the inventor, or one who bought from the inventor, but not those who are merely in privity with the inventor. A holder is defined as one who obtains an interest in the technology before it is actually reduced to practice. Investment partners and investment co-owners who contribute capital can qualify as holders so long as the contribution is made before actual reduction to practice. Constructive reduction to practice does not apply to the Internal Revenue Code definition. Reg Sec. 1.1235-2(d)(3)