intellectual property Archives

By Anthony Diosdi Whenever a U.S. person decides to establish a business abroad that will be conducted by a foreign corporation, it will be necessary to capitalize the foreign corporation with a transfer of cash and other property in exchange for its stock. When appreciated property, such as equipment or intangible property rights (e.g., foreign patents, knowhow and trademarks), is transferred to a foreign corporation, gain will often be realized by the U.S. person. This gain will be recognized and subject to U.S. tax unless one of the tax-free-exchange provisions of the Internal Revenue Code applies. The imposition of U.S. tax on a transfer of appreciated property to a foreign corporation is a substantial deterrent in many cases. Accordingly, tax planning is necessary to ensure that the transaction is structured…

By Anthony Diosdi In response to changing business conditions, U.S. corporations routinely organize new subsidiaries and divide, merge, and liquidate existing subsidiaries. These routine corporate adjustments generally are tax-free transactions, based on the principle that the transactions involve a change in the form of the corporation’s investment, not the parent corporation’s ultimate control of the investment. For example, in a wholly-domestic context, if a domestic corporation transfers appreciated property to a newly-organized subsidiary in exchange for all the shares of that subsidiary, the gain on that exchange is not recognized immediately, but instead postponed by having the subsidiary take a carryover basis in the property received. See IRC Section 351(a) and 362. However, if the subsidiary is a foreign corporation, then the ultimate disposition of the appreciated property may occur…

Tag: intellectual property

International Tax-Free Exchanges and the Deemed Royalty Regime for Intellectual Property

Two Potential Strategies to Avoid the Section 367 “Toll Charge” on the Outbound Transfer of Intellectual Property