I have a patent, for which I have been taking business deductions for some time. I have not sold the rights to the invention, although that is still a possibility. I also no longer have my business. It was my intention to deduct the patent maintenance expenses (and the costs of trying to sell the patent) as an investment expense on Schedule A, but now I see that it is susceptible to the 2% AGI limit. Due to some previous bad advise, some of my patent costs are capitalized and others are expensed. Explaining the reason for that consists of a long story that I won't repeat unless someone thinks it's necessary.
- I understand that costs for trying to sell the patent might be considered as an investment expense. Even if so, I don't think it is the IRS's intent to make the direct patent costs subject to limitations. I am willing to capitalize the patent expenses if I must, but I know of no way to do it. Should I capitalize? If so, how?
- Suppose I never sell the patent before it expires. In that case: May I write off all the capitalized expenses at that time? If so, what would be an acceptable depreciation period?
-- Gary Burton
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