Client has a trademark that he is selling over the next 5 years. 300K yr 1 and 400K yrs 2-5. Is this considered ordinary income or investment income?
-
Noel
"Some cause happiness wherever they go; others, whenever they go."- Oscar Wilde -
TTB, page 9-18 lists a trademark as a Section 197 intangible asset.
TTB, page 25-3 chart says that a self created Section 197 intangible is taxed as a capital gain when sold. An acquired Section 197 intangible is taxed as ordinary income for the part that represents previous amortization, and capital gain for any excess gain (same as depreciation recapture rule). -
A side note, only capital gain income can be recognized under the installment method. Any amortization recapture taxed at ordinary rates is recognized in the year of sale, even if payments are spread over 5 years.Comment
-
Thanks Bees
that is exactly what i was looking for. I just couldn't find it inTTB.Noel
"Some cause happiness wherever they go; others, whenever they go."- Oscar WildeComment
Comment