A Taxpayer Sells a Patent on a New Algorithm for a Gain

question 963

Multiple Choice

A taxpayer sells a patent on a new algorithm for a gain. Which taxpayer will be allowed capital gain treatment for the sale? Assume that the patent had not been placed in service as of the acquisition date.

• A) a corporation who purchased the patent from the inventor
• B) a sole proprietor who purchased the patent from the inventor
• C) Both of the above.
• D) None of the above.

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Definitions:

Material Quality

The attribute or property of a material, indicating its ability to meet specified standards for use or production.

Time-Saving Feature

A functionality within a system or application that helps streamline processes to reduce the amount of time required to complete tasks.

Account Payable

Short-term financial obligations or debts a company owes to its creditors for goods and services received.

Cash Purchase

A transaction where goods or services are paid for with cash at the time of purchase.