Taxation of Trade Secrets

Whether You’re Selling a Trade Secret Asset or Recovering Damages for the Disclosure of One It’s Important to Understand the Tax Character of the Proceeds

In a knowledge-based economy trade secrets play an ever more important role.  From recipes to software to chemical processes the true value of a modern company resides in its ability to do things few others can.   So when a trade secret is sold or wrongly disclosed there can be a significant impact to both the owner’s future earning potential and its balance sheet.

Failing to recognize the true tax character of that impact can lead to serious, long-term problems.  In the September, 2012 issue of Tax Strategies I published an article discussing a case in point.  It includes a discussion of the economic value of a trade secret and its tax character.

It also discusses the tax aspects of settlement agreements, and can serve as a cautionary tale for those now litigating in this area.  For some folks, it seems, winning can be just the beginning of a long, hard slog.

To read the full article click here: The Perils of Winning.

I hope you find it useful.



This article is for informational purposes only and does not constitute legal advice.  You should consult a qualified attorney before taking any action.