The U.S. Court of Appeals for the Third Circuit affirmed a decision of the U.S. Tax Court that had determined that because the taxpayer had not transferred “all substantial rights” to certain pharmaceutical technology, the royalties received by the taxpayer constituted ordinary income.
The Tax Court found the amounts the taxpayer received were not eligible for capital gains treatment because the taxpayer had retained “valuable rights in the technology” that were the subject of the transfer. The Tax Court thus sustained the deficiency determinations of more than $4 million for 2007 and over $1.7 million for 2008. Read TaxNewsFlash
On appeal, the taxpayer asserted before the Third Circuit that the rights were transferred prospectively—an argument, the Third Circuit noted, that was not presented to the Tax Court. The case is: Spireas v. Commissioner, No. 17-1084 (3d Cir. March 26, 2018). Read the Third Circuit’s decision [PDF 473 KB] that includes a dissenting opinion.
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