Tax law covers the rules, policies and laws that oversee the tax process, which involves charges on estates, transactions, property, income, licenses and more by the government. Taxation also includes duties on imports from foreign countries and all compulsory levies imposed by the government upon individuals for benefit of the state.
The tax practitioner community has belatedly become fully aware of the availability of patents for business method processes and financial transactions—including computer-driven processes that have tax- minimizing possibilities and even tax-advantageous methods of structuring transactions.
Patents and more generally franchises, concessions or licenses are depreciable on a straight line basis by apportioning the capital cost of each property over the life remaining thereon at the time the cost was incurred. If a patent, at the time it was purchased, had ten years to live before falling into the public domain, then, the purchaser will be permitted to take an allowance representing 10% of his capital cost every year for the next ten years. The inventor of a newly obtained patent could amortize his cost by taking a depreciation representing 1/17 of his cost for the following 17 years.
The franchises, concessions and licenses can be considered inter alia as franchises, concessions and licenses of patents, copyrights, trade-marks and industrial designs. The sale of a patent or its concession under license will have, for the parties concerned, tax implications not to be neglected. The sale of a patent can give rise to a capital gain and to recapture of capital allowance. Under special circumstances, the sale of a patent can generate business income. The criterias to be used to determine if a sale of a patent generates a capital gain or business income.