( The following is an excerpt from our Intangible Asset Exchange Advisor newsletter located here )
Intangible Property (I.P.) assets can be rightly considered one of the most important assets in commerce today. I.P. assets include assets such as patents, trade secrets, copyrights, trademarks/trade dress, and intangibles that are specified in a contract between the contracting parties. Since these assets are intangible and are, by nature, not capable of being weighed or measured physically, the process of valuation is a little more difficult for the Company owning the asset.
Why should we bother to value such elusive assets? The proper management and commercial exploitation of these assets by the Company depend upon the value of these assets to the Company. Valuations are used for a variety of reasons including accounting purposes, financing and securitization, and the purchase or sale of assets or litigation. Each I.P. asset owned by the Company must compete for scarce capital and resources, R&D funding, human resources, and legal, accounting and financial support.
I.P. Assets and 1031 Exchanges. In addition, owners of I.P. assets can benefit from the deferral of taxation on the gains from the sale or exploitation of these assets when properly structured as a Section 1031 Exchange. This deferral creates a further competitive advantage for the Company, since 100% of the proceeds can be reinvested in new Intellectual Property assets. This significantly boosts the internal rate of return earned for the Company and its investors on these assets.
