Society is currently transforming from a tangible commodity-based community [such as means of production] into a real wealth of intangible property. We are moving towards a period when knowledge and ideas are more valuable than physical objects. Intellectual property, such as patents, copyrights, trademarks and even trade secrets, are all industries that are driving the country's booming development. With the widespread use of the Internet, the creation of intellectual property is no longer limited to large companies or wealthy individuals who can afford to develop such property. Anyone can develop value through copyright, patentable inventions or trademarks. As intellectual property continues to evolve as a tool for wealth creation, individuals will face the challenge of determining the value of the property and the impact of such property on the estate tax.
The inheritance tax on intellectual property, especially the copyright-based estate tax, can have a fundamental impact. When determining the estate of a person for an estate tax, it is first necessary to determine the estate of a person. A person's total property includes probate assets and other tangible and intangible assets, such as retirement accounts or joint property. The current estate tax exemption is $2 million and will remain at this level in 2008. The 2009 estate tax allowance will be increased to $3.5 million and is currently being reimbursed for compensation in 2010.
When assessing intellectual property for the purposes of an estate tax, the taxable amount is generally considered to be the fair market value of the intellectual property on the day the creator dies. For example, the fair market value of copyright is often seen as its income-generating potential, discounted at a net present value. A common way to determine the fair market value of a copyright is to determine the possible annual benefits of intellectual property in the future [usually 5 to 7 years]. A multiple [usually between 3 and 7] is then applied to the current estimate. Most valuation analysis is highly subjective, so the accepted method of determining the lowest valuation is usually the best option, at least in terms of estate tax.
Often, the value of the intellectual property that is valuable in the estate of the deceased will exceed the existing liquid assets or cash on hand to pay the estate tax. This usually results in the estate being forced to sell some of the property in the estate to pay the estate tax. Alternatively, the "Domestic Tax Law" allows for tax extensions. The "Domestic Tax Law" §6161 allows the inheritance tax to be extended for up to ten years, subject to reasonable reasons. Reasonable reasons are often interpreted as indicating that the estate is contracted with non-current intellectual property. The extension may allow the estate to spend time determining how to pay the estate tax without being forced to rush to decide to sell the estate. However, please keep in mind that the estate does have to pay interest on the deductible, which is usually a short-term federal tax rate plus 3%. See IRC §6621[a][2].
Most of the wealth of society lies in intangible intellectual property. In determining the total amount of the deceased's estate for tax purposes, it is necessary for enthusiastic advocates to choose a generally accepted valuation method that is most beneficial to the client. Valuation methods vary by industry and type of intellectual property [copyright, trademark or patent]. If you or your client's real estate contract a large amount of intellectual property, you may need to contact a lawyer who is experienced in intellectual property assessment and tax planning. Contacting hotel promotions can save a lot of money in the form of taxes, allowing them to dispose of the remaining property in accordance with the will of the will.
Orignal From: How intellectual property assets affect estate taxes
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