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Archived updates for Friday, February 11, 2005

I/P Charitable Contribution Deduction Update

According to a January 25, 2005 article by Judith M. Hecker, the 2004 amendments to Section 170 of the Internal Revenue Code now limit the amount of the charitable deduction for patents and similar intellectual property ("IP") contributed after June 3, 2004 to the lesser of the property's basis or fair market value when contributed.

However, in certain circumstances, an additional deduction may be allowed in the year of the contribution or subsequent years, based on a sliding-scale percentage of the "qualified donee income" received or accrued by the donee that is allocable to the contributed patent or IP. However, these additional deductions also require that the donor provide notice to the donee, and that the donee substantiate and reporting the additional deductions.
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