Issues

1-. What are the tax consequences if Jean & Joseph create the corporation by transferring the Tricometer intellectual property and more than $10,000 of cash so that corporation can acquire the patent, trade name and trademark?
2-. What are the tax consequences if Jean & Joseph jointly acquire the patent, trade name and trademark; create the corporation with more than $10,000 cash; and license the patent, trade name and trademark to the corporation in return for royalties?
3-. Add another step to#2, i.e. giving the intangibles to children under 16 or over 15?
Facts

Jean Reinhard and Joseph Glid are presently paid engineers employed by General Electric Company. They are both subject to the highest marginal income tax rate. They …show more content…
On the other hand, when it is about the patents, Jean and Joseph will be able to reflect the transaction as a sale of a property owned for more than 1 year, as it is stated of the Section 1235 of the IRC. However, under Section 351 no gain or loss can be recognized from the exchange of property for stocks because Jean and Joseph are going to be in control of the corporation right after the operation. Generally, the cost of purchasing IP is not currently deductible but is instead “capitalized” in the cost of the IP and recovered through ratable amortization over a period of years. The method and term of amortization depends on the circumstances under which the taxpayer acquired the IP.
The Corporation once created must cover the cost of transferring the patent, trade name and trademark. Also must be entitled with the cost of licensing these intangible properties. The $10,000 in cash could be recognized as the basis of each partner in the company. The mentioned amount would be divided by the 2 partners. However, they could use the money to cover the organizational expenditures and deduct them as a corporation under Section 248. If the IP is transferred to the corporation for this to acquire the patent, trade name and trademark,