Like many business assets, trademarks can incur expense and generate income. Expenses might include advertising or litigation costs. Income may be generated through licensing or sale of the trademark. These two functions have important tax consequences, and each is governed by separate provisions of the Internal Revenue Code (Code). The tax treatment afforded to trademarks under the Code can have a significant impact upon the way in which a company structures a particular transaction or whether it wishes to undertake the transaction at all.
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