Cascade Designs, Inc. - Page 34




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          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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