- 34 -
and the legislative history of section 1235 in support of their
position.
Previously, in Poole v. Commissioner, supra at 404-405, we
addressed these same arguments and found them unsound, stating:
We also find unsound Poole's alternate contention
that if section 1235 does not apply to the * * *
transfers, he is entitled under other provisions of law
to capital gains treatment for the royalties paid in
connection with such transfers. The legislative
history with respect to section 1235 explains that a
holder's recourse to prior case law is proper only when
the transaction is not one described in section
1235(a). In other words, if the payments for a patent
are contingent upon productivity, use, or disposition,
or if they are payable periodically over a period
generally coterminous with the transferee's use of the
patent, section 1235 is the holder's exclusive
provision for qualifying for capital gains * * *.
Moreover, this interpretation of the effect of section
1235 is supported by an analysis of the effect of the
provisions of the section. If a holder transfers a
patent resulting in the payment of royalties in the
manner described in section 1235(a) to a related
person, and if we were to hold that such a transfer is
entitled to capital gains treatment under another
provision of law, we would be nullifying section
1235(d). Since section 1235(d) was included in the
law, it must have been done for a purpose--the purpose
of denying capital gains treatment to a holder's
transfer to related persons when the payments are of
the type described in section 1235(a). [Fn. ref.
omitted.]
9(...continued)
whether or not such transfer is the sale or exchange of
a capital asset. For example, a transfer by a person
other than a holder or a transfer by a holder to a
related person is not governed by section 1235. The
tax consequences of such transaction shall be
determined under other provisions of the internal
revenue laws.
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