Incentive To Innovate
In order to qualify for capital gain treatment, the sale must be of all substantial rights in the patent or an undivided interest in all the substantial rights. This might create a significant business issue since a sale that is restricted to a particular industry or geographic area will not qualify. I think it is possible that 1235 is not thought about a lot, because the end game of a lot of startups is the creation of a public company or being taken over by one. I think this is what accounts for the strange popularity of C corporations. Nonetheless, it can be a great benefit in the right circumstances and should not be neglected.
Blast From The Past
Accountants understand cancellation of indebtedness income because they think in double entry. Some of them think there is a big balance sheet in the sky. If somebody writes something off without somebody picking up income the fabric of space-time will become disturbed. They can be extremely disturbed by asymmetrical results. Personally I put taxing debt discharge income in the same category as the GAAP going concern qualification. It’s kicking somebody when they are down.
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Over and over again courts have said that there is nothing sinister in so arranging one’s affairs as to keep taxes as low as possible. Everybody does so, rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands: taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant.