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Top Articles - How Intellectual Property Assets Affect Estate Taxes
Society is currently moving through a transition from a community whose wealth is based in tangible goods, such as the means of production, to a community whose true wealth lies in intangible forms of pro
According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product
perty. We are moving toward a period where knowledge and ideas are more valuable than physical objects. Intellectual property, such as patents, copyright, trademarks and even trade secrets are what driv
; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.
Examples of combination products may in
Examples of combination products may in
e many of this country’s booming sectors. With widespread internet access, the creation of intellectual property is no longer restricted to large corporations or wealthy people who can afford to develop
lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.
such property. Any person can develop value through a copyright, a patentable invention or a trademark. As intellectual property continues to grow as a wealth creation tool, individuals will be faced wi
here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe
th the challenge of determining the value of the property, and the effect that such property will have on estate taxes.
Estate taxes on intellectual property, especially those based on copyrights, can ha
Estate taxes on intellectual property, especially those based on copyrights, can ha
d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.
Combination pro
Combination pro
ve a substantial effect. When determining a person’s estate for purposes of estate taxes, it is first necessary to determine one’s gross estate. A person’s gross estate includes probate property and oth
ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc
er tangible and intangible assets, such as retirement accounts or joint property. The current exemption for estate taxes is $2 million and will remain at this level through 2008. The estate tax exemptio
easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi
n amount will then increase to $3.5 million in 2009, and is currently scheduled to be repealed in 2010.
When valuing intellectual property for estate tax purposes, the taxable amount is generally accepte
When valuing intellectual property for estate tax purposes, the taxable amount is generally accepte
nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically
d to be the fair market value of the intellectual property on the date of the creator’s death. For example, the fair market value of copyrights will generally be considered their income producing potenti
and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ
al, discounted for net present value. A common method for determining a copyright’s fair market value is to determine the likely annual earnings for the intellectual property for a future period, often b
ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi
etween 5 and 7 years. A multiple, often between 3 and 7 is then applied to that number for the current valuation. Much of the valuation analysis is largely subjective, so determining the accepted method
ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.
Following aspects would a
Following aspects would a
with the lowest valuation is usually the best choice, at least in terms of estate tax purposes.
Often, the taxes on a valuable piece of intellectual property in a decedent’s estate will be more than the
Often, the taxes on a valuable piece of intellectual property in a decedent’s estate will be more than the
dd to the challenges in developing combination products:
Which markets to tap where the combination products can do fairly well?
Which combination prod
Which markets to tap where the combination products can do fairly well?
Which combination prod
available liquid assets or cash on hand to pay the estate tax. This often results in the estate being forced to sell some of the property in the estate to pay for the estate tax. Alternatively, the Int
cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin
ernal Revenue Code does allow for tax payment deferment. Internal Revenue Code § 6161 allows for the deferment of estate taxes for up to ten years with a reasonable cause showing. Reasonable cause has of
tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen
What would be the developing cost?
How to tackle the risks encountered during combination product developmen
ten been interpreted as being met with a showing that the estate is comprised of illiquid intellectual property. This deferment period can allow an estate to take its time in determining how to pay the e
t?
As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel
As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel
state taxes, without being forced to make a hasty decision to sell estate property. However, keep in mind that the estate does have to pay interest on the deferment amount, which is generally the short t
ping new procedures for reviewing their safety, efficacy and quality.
Professional from academic institutions, pharmaceutical industries, health care indust
Professional from academic institutions, pharmaceutical industries, health care indust
erm federal rate, plus 3%. See, IRC § 6621(a)(2).
Much of society’s wealth lies in intangible intellectual property. When determining the amount of a decedent’s gross estate for tax purposes, it is nec
Much of society’s wealth lies in intangible intellectual property. When determining the amount of a decedent’s gross estate for tax purposes, it is nec
y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products
essary for the zealous advocate to choose the generally accepted valuation method that is most advantageous to the client. Valuation methods will vary by industry and type of intellectual property, be it
.
As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de
As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de
copyright, trademark or patent. If you or your client’s estate is comprised largely of intellectual property, it may be necessary to contact an attorney experienced in intellectual property valuation an
elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.
Companies that provide selfless information through particip
Companies that provide selfless information through particip
d tax planning. Contacting the property advocate may save the estate a substantial amount in the form of taxes, allowing it to dispose of the rest of the property in accordance with the decedent’s wishes
tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products
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