On 18/10/06, Anthony wikilegal@inbox.org wrote:
No. Copyrights are only deductible to the extent of the basis in the property (essentially how much you spent to obtain it). For copyrights purchased from someone else you might also be able to deduct any net income which the charity makes off the copyright. See the American Jobs Creation Act of 2004.
So *that's* what the "basis" is. I was finding that detail surprisingly hard to figure out!
Hmm.
"If you donate a patent or other intellectual property ... your deduction is limited to the basis of the property or the fair market value of the property, whichever is less." - IRS Publication 526.
So does this mean that it's considered valueless until someone has bought or sold it - it has no basis until then? I can sort of see how this might happen, but it seems conceptually odd on some level...
On 10/18/06, Andrew Gray shimgray@gmail.com wrote:
On 18/10/06, Anthony wikilegal@inbox.org wrote:
No. Copyrights are only deductible to the extent of the basis in the property (essentially how much you spent to obtain it). For copyrights purchased from someone else you might also be able to deduct any net income which the charity makes off the copyright. See the American Jobs Creation Act of 2004.
So *that's* what the "basis" is. I was finding that detail surprisingly hard to figure out!
Hmm.
"If you donate a patent or other intellectual property ... your deduction is limited to the basis of the property or the fair market value of the property, whichever is less." - IRS Publication 526.
So does this mean that it's considered valueless until someone has bought or sold it - it has no basis until then? I can sort of see how this might happen, but it seems conceptually odd on some level...
--
- Andrew Gray
Well, I hear that's one definition of value economics uses - what someone is willing to pay for something.
Although suppose I wrote an article and sold a guaranteed licensed free and vandalism free copy to some project like Citizendium or the Encyclopedia Project, and I donated the copyright to the Wikimedia Foundation: would that then be deductible?
--Gwern
gwern branwen wrote:
On 10/18/06, Andrew Gray shimgray@gmail.com wrote:
On 18/10/06, Anthony wikilegal@inbox.org wrote:
No. Copyrights are only deductible to the extent of the basis in the property (essentially how much you spent to obtain it). For copyrights purchased from someone else you might also be able to deduct any net income which the charity makes off the copyright. See the American Jobs Creation Act of 2004.
So *that's* what the "basis" is. I was finding that detail surprisingly hard to figure out!
"If you donate a patent or other intellectual property ... your deduction is limited to the basis of the property or the fair market value of the property, whichever is less." - IRS Publication 526.
So does this mean that it's considered valueless until someone has bought or sold it - it has no basis until then? I can sort of see how this might happen, but it seems conceptually odd on some level...
Well, I hear that's one definition of value economics uses - what someone is willing to pay for something.
Although suppose I wrote an article and sold a guaranteed licensed free and vandalism free copy to some project like Citizendium or the Encyclopedia Project, and I donated the copyright to the Wikimedia Foundation: would that then be deductible?
Usually no.
Ec
Andrew Gray wrote:
On 18/10/06, Anthony wikilegal@inbox.org wrote:
No. Copyrights are only deductible to the extent of the basis in the property (essentially how much you spent to obtain it). For copyrights purchased from someone else you might also be able to deduct any net income which the charity makes off the copyright. See the American Jobs Creation Act of 2004.
So *that's* what the "basis" is. I was finding that detail surprisingly hard to figure out!
"If you donate a patent or other intellectual property ... your deduction is limited to the basis of the property or the fair market value of the property, whichever is less." - IRS Publication 526.
So does this mean that it's considered valueless until someone has bought or sold it - it has no basis until then? I can sort of see how this might happen, but it seems conceptually odd on some level...
Cost and value are two different concepts. The "basis" is essentially what you paid for the property. Property can be real, chattel or intangible. For this discussion the emphasis on "intellectual property" is on "property" of which this is an intangible form. The basis can be adjusted for various events that occur while you hold the property. These adjustments will depend on how the subject country's tax laws are structured, and one should never assume that what works in one country will work in another. Among the most common activities that give cause for such adjustments are depreciation, depletion or amortization. Such claims will lead to a reduction of the basis.
"Value", in the absence of an actual sale in a fair market, is often an artificial amount. The term "fair market value" represents what would be the agreed price paid by a willing buyer to a willing seller in a market where both parties have full knowledge of the market conditions. This idealized figure is the subject of frequent tax litigation, especially since the tax effects on the two parties will usually be in conflict.
Where the value exceeds the basis there will be either a profit or a capital gain depending on why you had the property in the first place. For a person that does not have the property as a part of a business it will generally be a capital gain. When such a property is gifted to a charitable organization it triggers a capital gain. It also triggers a charitable donation deduction for the full value. Under some tax laws the net effect will be that you have a deduction for what it cost you to buy the property. One of the motivations behind this kind of legal structure is to prevent donations in kind at artificially elevated valuations.
Notwithstanding this elementary situation some countries will build in more favorable incentives into their tax laws to encourage charitable giving. Because of the complexity of these rules one is well advised to review the laws of his own country before making such a donation. Gifts to foreign organizations frequently do not receive the same benefits as domestic gifts.
Ec
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