John L <johnl[at]iecc.com> wrote:

- quote -

It seems to me that if the licensing back is part of the
transaction, he didn't really sell all the rights. If the
licensing back is a separate arms-length transaction (e.g.
if he gets the same terms as someone unrelated who wanted to
license would get, or better, did get) then he did sell all
the rights.

My opinion is worth twice what you paid for it.

Seth

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An inventor has a patent that he wishes to sell to a
company. So far so good, IRC sec 1235 says that if an
inventor sells "all substantial rights", it's treated as a
capital asset and capital gains rates apply.

He'd like to keep making his patented widgets, which
presumably can be handled by the company granting back a
license. The question is whether that disqualifies the sale
for capital gains treatment.

The usual advice would be to consult a Knowledgable Tax
Professional. Well, he did, several in fact, and their
combined advice can be summarized as "I dunno". Inventors
sell their patent rights all the time, and he's surely not
the first one to want such a grant back. So where's the IRS
rulings, case law, etc?

<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >