Voila! Create deductions for intellectual property

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in Small Business Tax,Small Business Tax Deduction Strategies

If you donate intellectual property (such as patents) to charity, you can claim a tax deduction for your generosity. But the 2004 tax law restricts what you can deduct.


Strategy: Give away high-basis property and hold on to low-basis property (unless there are extenuating factors). By doing so, you can maximize the tax benefits for these donations.


Your write-off for intellectual-property donations made after June 3, 2004, is limited to the lesser of your basis in the property or its fair market value. In most cases, your deduction won't exceed your cost. But the new law also provides extra deductions over 12 years based on the "qualified donee income" received or accrued by the charity. This extra deduction is figured on a sliding scale percentage allocable to the property for each year.

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