Tax Cuts and Jobs Act (Public Law No.115-97)

  • Excludes certain patents, designs and secret formulas or processes from the definition of “capital asset”
  • Removes the ability to treat such intellectual property as a capital asset that would have been subject to lower capital gains tax rate of 20%
  • Treats gain from the sale of such assets as ordinary income, subject to higher rates

https://www.uspto.gov/sites/default/files/documents/20180201_PPAC_Legislative_Update.pdf

5 thoughts on “Tax Cuts and Jobs Act (Public Law No.115-97)

  1. 3

    Trade off for immediate expensing of capital expenses would be my guess. If R&D is expensed, gains from it would be ordinary income.

  2. 2

    Anyone know the reasoning behind these changes?

    Also, what is the “certain” in “Excludes certain patents, designs and secret formulas or processes from the definition of “capital asset”?

    1. 2.1

      I can’t speak to reasoning, other than that I believe there was a need to recapture enough revenue to not run afoul of the Byrd rule.

      The bill amended 26 USC 1221 to specify that the term “capital asset” does not include:

      (3) a patent, invention, model or design (whether or not patented), a secret formula or process, a copyright, a literary, musical, or artistic composition, a letter or memorandum, or similar property, held by-
      (A) a taxpayer whose personal efforts created such property,
      (B) in the case of a letter, memorandum, or similar property, a taxpayer for whom such property was prepared or produced, or
      (C) a taxpayer in whose hands the basis of such property is determined, for purposes of determining gain from a sale or exchange, in whole or part by reference to the basis of such property in the hands of a taxpayer described in subparagraph (A) or (B).

      The change was insertion of “patent, invention, model or design (whether or not patented), a secret formula or process,” before “a copyright”.

      The bill made a similar amendment with respect to definition of “property used in the trade or business” in 26 USC 1231.

  3. 1

    Now HERE would be an opportunity for a political putdown of the “Trump strategy”….

    1. 1.1

      Yes indeed, the silence is deafening here from all the blog commentators who had illogically convinced themselves that once their favorite political party obtained total control of Congress and the Executive Branch that it would ride to their rescue, rather than a financially lancing private inventors and other patent owners.

Leave a Reply

Your email address will not be published. Required fields are marked *

 Notify me of followup comments via e-mail.

You can click here to Subscribe without commenting

Add a picture