Intellectual property acquisitions under new prop. regs

Article Abstract:

Taxpayers who want to determine the deductibility of the expenses connected to the acquisition of intellectual property should consider Sec. 197 of the Omnibus Budget Reconciliation Act of 1993. It addresses the amortization of intangibles held in relation to the conduct of a trade or business or a Sec. 212 activity. Proposed Regulations have been released to provide guidance regarding the extent of the provision's coverage. According to these proposals, a taxpayer can ascertain if Sec. 197 is applicable by assessing what kind of intellectual property is involved and how it is being acquired. The types of intellectual property covered by Sec. 197 are patents and copyrights, know-how, trademarks and computer software. Application of the section is based on the payment structure, such as fixed price paid at closing, fixed price payable over time, contingent payments and renewals. Anti-churning rules apply when claiming a deduction under Sec. 197.

Copyright Programs, Intellectual property, Copyrights

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Implied promise of gifts does not void heirs' disclaimers

Article Abstract:

A circuit court rejected the Tax Court's ruling that disclaimers made by several heirs in 'Est of Monroe' were unqualified. The case involved a decedent who made over 30 specific cash bequests to family members, friends and employees, and who made her husband the executor of her estate. Her husband and nephew asked the heirs to disclaim the bequests so that these would not be considerably reduced by transfer tax. The disclaimed amount therefore passed on to the husband, who subsequently gave each disclaimant a gift whose amount was close to the individual disclaimed bequests. These gifts were later reflected on the husband's tax returns. The Tax Court refused to recognize the disclaimers as 'unqualified' refusals under Sec 2518, contending that they were made with the heirs expecting to receive the bequests in another form. The circuit court rejected the Tax Court's interpretation of the statute, Regulations and IRS letter rulings.

Cases

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Regs. modify rules for disclaimers of joint interests

Article Abstract:

Proposed Regulations offer further guidance on the rules for qualified disclaimers. These regulations explain that the period for making disclaimers on an interest in property starts right from the formation of the interest regardless of whether or not it was created in a taxable transaction. Revisions to existing regulations are introduced to allow a surviving joint tenant to make a disclaimer on the survivorship interest that becomes effective at the death of the first joint tenant. The Proposed Regulations provide clarifications on the areas of transfer creating interest, jointly owned property and joint bank account or brokerage account. The Regulations will take effect at the issuance of final Regulations.

Financial Regulatn NEC, Financial services, Commercial law, Joint tenancy

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