LEGAL FEES FOR TRADEMARK DEFENSE

[michaelmars]

Client was plaintif in a trademark infringement suit and lost. anyone know off hand if the legal fees are deductible or must be capitalized, etc. I have no research available to me next 2 days out in the field.

-thanks

[DANRVAN]

PER RIA:

¶307,722. Trademark and trade name expenditures.

Trademarks and trade names are “section 197 intangibles” that must be amortized over the 15-year period that begins with the month the trademark or trade name was acquired. See ¶ 249,000 et seq.

For property acquired after Aug. 10, '93 under a binding contract in effect on that date, the taxpayer could elect to have the above rule not apply. See ¶ 269,028 .

For property acquired before Aug. 11, '93 25.1 the above rule did not apply (except for property acquired after July 25, '91, if the taxpayer made the “retroactive” election discussed at ¶ 269,027 ). Instead, trademark and trade name expenditures were capital expenditures that were recovered upon the sale or other disposition of the asset. The expenditures couldn't be depreciated or amortized. 26 However, legal fees incurred to prosecute a trademark infringement suit and to recover lost profits were deductible as business expenses. 27

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25.1

Sec. 13261(g)(1), PL 103-66, 8/10/93 .

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26

Genl Expl of Tax Reform Act of '86, PL 99-514, 5/4/87, p. 143 .

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27

Rust-Oleum Corp v. U.S., (1967, DC IL) 21 AFTR 2d 516 , 280 F Supp 796 , 68-1 USTC ¶9168 .

© 2010 Thomson Reuters/RIA. All rights reserved.

[michaelmars]

PER RIA:

26 However, legal fees incurred to prosecute a trademark infringement suit and to recover lost profits were deductible as business expenses. 27

Exactly what i was looking for-thanks so very much