How "Taxing" Does A Patent Transfer Have To Be?

Whether you are transferring patent or acquiring rights in a patent, the tax consequences can vary greatly depending on how the transfer is structured. The IRS has recently issued a document (Legal Advice by Field Attorney 20131201F) (the "IRS Advice") in which the issue was whether an individual had sold or had licensed a patent to a corporation in which he was a shareholder. The IRS concluded that the individual sold the patent to the corporation, primarily because the transfer documents indicated the transaction was a "sale," rather than a "license." The individual had filed his tax return for the year of the transaction as if the transfer were a sale, while the corporation filed its tax return as if it were a licensee of the patent.