Daily Tax Tip Spotify Podcast and/or WordPress Blog Post and Inventor Not Entitled to Capital Gain Treatment for a Transfer of Patent Right

This Daily Tax Tip Spotify Podcast and/or WordPress Blog Post discusses an Inventor who is Not Entitled to Capital Gain Treatment Transfer of Patent Rights.

In Filler v. Comm’r, T.C. Memo. 2021-6, the Tax Court held that a taxpayer, who is a highly educated doctor, lawyer, professor, and inventor, was not entitled to Code Sec. 1235 treatment on his receipt of $100,000 of income that related to the transfer of his rights in a patent, nor was he entitled to long-term capital gain treatment because he did not satisfy the holding period requirement and failed to prove that he had a “sale or exchange.”

In addition, the Tax Court found that he was:

(1) liable for self-employment tax on the $100,000;

(2) failed to establish entitlement to a deduction for a loss originating in 2012, and thus was not entitled to a net operating loss carryover deduction claimed for tax year 2014; and

(3) was liable for a penalty under Code Sec. 6662(a) for substantial understatement of income tax.

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