Are trademark fees allowable for tax [With Tuto]

Last updated : Aug 15, 2022

Are trademark fees tax deductible?

If you pay franchise, trademark, or trade names fees, these costs generally are considered deductible business expenses.

Is a trademark a business expense?

It is not an expense. create an asset account and book the costs to that asset account, create a sub account for accumulated depreciation. It is what the IRS calls a section 197 intangible, and it is depreciated over 15 years.

What expense category is trademark?

Trademarks are assets of a business. They are included under intangible assets in the balance sheet.

What legal and professional fees are tax deductible?

Legal and other professional fees are not specifically mentioned in the Code as deductible items. Therefore, a taxpayer is able to deduct these types of fees only if they qualify as “ordinary and necessary” expenses under §162 (business expenses) or §212 (expenses related to the production of income).

Are legal fees tax deductible in 2021?

Any legal fees that are related to personal issues can't be included in your itemized deductions. According to the IRS, these fees include: Fees related to nonbusiness tax issues or tax advice. Fees that you pay in connection with the determination, collection or refund of any taxes.

Can trademarks be amortized?

Because a trademark can be renewed every 10 years with the U.S. Patent and Trademark Office indefinitely, a business typically does not amortize a trademark in its accounting records.

How do you categorize trademark expenses in Quickbooks?

Change the Account Type to "Expense." Type a name for the account, for example, "Amortization Expense." Describe the expense account further in the description field if needed. Select "Unassigned" for the tax-line mapping. Click "Save and Close."

What is trademark in accounting terms?

A trademark is an intangible asset, as it's nonphysical item granting a business the legal right to exclusively use a logo or other item. This means it is reported on a business's balance sheet.

How is trademark recorded on balance sheet?

Trademarks are recorded at asset side of the balance sheet. It is a type of intangible assets. It is non-physical in nature which grants the company legal rights to use a particular logo or symbol exclusively. The value of trademark is determined the cost of acquiring it.

Why trademark is considered as intangible assets?

An intangible asset is an asset that is not physical in nature, such as a patent, brand, trademark, or copyright. Businesses can create or acquire intangible assets. An intangible asset can be considered indefinite (a brand name, for example) or definite, like a legal agreement or contract.

How many years do you amortize trademarks?

You must generally amortize over 15 years the capitalized costs of "section 197 intangibles" you acquired after August 10, 1993. You must amortize these costs if you hold the section 197 intangibles in connection with your trade or business or in an activity engaged in for the production of income.

What business legal fees are deductible?

The general wisdom is that business legal fees are tax deductible. So long as the fee is both “ordinary and necessary” in the course of business, you can deduct it. By contrast, personal legal fees are not tax deductible. The exception is legal fees incurred by an individual in the course of trade.

What are examples of professional fees?

What Are Professional Fees. Professional fees refer to the fees charged by a person considered to be a “professional” such as a lawyer, accountant, doctor, engineer, financial planner, appraiser, management consultant, or other.

What are non deductible legal expenses?

Legal expenses associated with obtaining custody or visitation rights to children are non-deductible. You can deduct on your income tax any legal fees you paid in the year to collect or establish a right to collect salary or wages.

Where do I deduct professional fees?

Line 8860 – Professional fees (includes legal and accounting fees) Deduct the fees you incurred for external professional advice or services, including consulting fees. You can deduct accounting and legal fees you incur to get advice and help with keeping your records.

What type of expense is legal fees?

The legal fees Ira pays Jake are a deductible business expense. Legal and professional fees that you pay for personal purposes generally are not deductible. For example, you can't deduct the legal fees you incur if you get divorced or you sue someone for a traffic accident injury.

Are legal fees on sale of business allowable?

Are the legal fees capital in nature? Legal and professional fees that are incurred in respect of a capital item are not allowable, such as those associated with incorporation, acquisitions, disposals, the improvement or destruction of assets.

Is a trademark a capital asset?

Thus, the U.S. trademark will be a capital asset unless it is property, used in a trade or business, of a character which is subject to the allowance for depreciation under section 167 as described in section 1221(2).

Is a logo an asset or expense?

Logos are intangible assets of a company. Intangible assets provide value to a company because they are part of the brand that consumers associate with the company's products and services.

Is trademark a depreciating asset?

No, a trade mark is not a depreciating asset as defined in subsection 40-30(1) of the ITAA 1997.

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hey what's up everybody this is attorney dan nguyen and today i want to talk about trademarks and whether trademark costs are tax deductible so i don't profess to be a tax attorney or cpa or an enroll agent or a tax professional but i do have being a business owner and having dealt with taxes um on a tangential basis i think i can do my best to answer this question but first you gotta understand what what the irs uses as a standard for what can be tax deductible now generally speaking and this is what i found on the irs website you know it has to be ordinary and necessary okay and so then you get to ask hey what's ordinary and necessary that is common and acceptable in your particular industry in my opinion and i think most most accountants uh tax professionals agree that legal fees and trademark costs are tax deductible okay and so uh it is a furtherance of your business it is something that you are protecting for your business and so i think certainly it is ordinary and necessary for your business and are tax deductible so uh you know if you are a business owner looking to um protect your business name your logo or slogan and uh you know get want to get a tax deduction as a bonus feel free to reach out to us and we can see um you know how we can help you okay this is dan talk to you soon bye

Thanks for your comment Darell Cuzman, have a nice day.
- Shelton Nitti, Staff Member

hello friends you are tuned in to the supreme court historian youtube channel this is going to be our first ever tax law decision and also our collections first ever intellectual property law decision this is the commissioner of income tax bombay versus finlay mills limited decided by the supreme court on the 1st of october 1951 the case revolves around three concepts the concept of a trademark and what is its registration what does it amount to and the concepts of revenue expenditure and capital expenditure so let us discuss these three concepts at the outset in a very brief manner by giving illustrations so the first thing that we will discuss is the concept of a trademark which is basically what we uh call a brand name for example so as an illustration let's take let's take this channel supreme court historian i have named this uh channel supreme court historian and i'm uploading videos on this particular subject under this channel heading what if somebody else creates that same name and starts uploading videos as well do i have any legal remedy against this other person the remedy is if i had already registered my channel name as a trademark then nobody else can use it so i can prevent other people from using my brand name and to do that i have to register my channel name as a trademark in order to register as a trademark i obviously have to pay the government some sort of fee some sort of expense has to be incurred by me now what does this income fall under when i file my tax returns is it a revenue expenditure or is it a capital expenditure i am assuming now that i am a company a company incurs certain operational expenses periodically such as paying salaries to its employees or maintaining its offices and premises stuff like that all of that falls under revenue expenditure on the other hand um larger expenses which are not periodical which are uh which are what we call once and for all those expenses which result in the generation or creation of an asset such as buying land or building a factory or buying machinery all of these are assets belonging to the company and the expenses incurred in creating these assets they fall under capital expenditure and it is these three concepts around which cit bombay versus finlay mills revolves the facts are as follows 1943-44 and 1944-45 assessment years the tax returns filed by finlay mills for these two tax for these two assessment years contained certain entries under revenue expenditure these entries related to the expenses that finlay mills had had paid in order to register their trademark these expenses had been incurred by by way of the fee that they paid to the patents office in order to create these these trademarks and according to finlay mills this money that they spend should fall under revenue expenditure the tax department disagreed according to the interpretation of the income tax department the money paid for registering your trademarks should fall under capital expenditure according to the tax department represented in this situation by the commissioner of income tax bombay according to them the registering of a trademark results in the creation of an asset according to them a trademark is basically an asset according to finlay mills the trademark is just your regular operating expense so this uh particular question had to be decided by obviously the judicial authorities which happened to be in uh income tax cases it was the jurisdiction was held by the income tax tribunal which found in favor of finlay mills the income tax tribunal said that indeed trademark registration fees fall under revenue expenditure for this purpose for arriving at this decision the income tax tribunal had relied on a bombay high court judgment uh that had come on the 2nd of september 1946 cit bombay versus century spinning and weaving century spinning and weaving was another textile mill in bombay just like finlay mills was a textile mills in bombay obviously the trademarks that both of them had registered must have been the name of the fabric that they had they had been manufacturing something like raymond or vimal or something like that i'm not very well informed in these matters so anyway uh the cit bombay versus century spinning and weaving was relied upon by the income tax tribunal but cit bombay wanted to overturn this decision so they asked the income tax tribunal to pose this question to the bombay high court again basically they wanted the bombay high court to overturn its own decision that it had given in the century spinning and weaving case on 23rd march 1949 the bombay high court refused to overturn and instead reaffirmed its decision in the century spinning and weaving case thus upholding the income tax tribunal's decision as well the bombay high court basically once again reiterated that trademark registration fees fall under revenue expenditure and the cit bombay decided to appeal this to the supreme court obviously if you have to overturn that decision it has to go to the supreme court the case was heard by a three judgment chief justice and justices mahajan and and chandra shekhar ayer the bench basically had to then ah figure out the import of these three concepts what is really a trademark and what does its registration amount to what is capital diff expenditure and how does it differ from revenue expenditure the cit was represented by the attorney general mcc talwad and he made this argument he relied on an old house of lords judgment british insulated and health b cables versus arthritis happened to be the name of the income tax commissioner in in britain in whatever part of britain this was being contested the house of lords laid down the principles of differentiating between capital expenditure and revenue expenditure and to quote lord caves pretty immortal words when an expenditure is made not only once and for all but with a view to bringing into existence an asset or an advantage for the enduring benefit of the trade there is very good reason for treating such an expenditure as properly attributable not to revenue but to capital so let's break this uh lengthy and informative sentence into bullet points the first point is basically when you try to differentiate how will you define a particular expenditure as expenditure according to lord cave it should fulfill the following criteria first of all it should be an expenditure that is made once and for all it should not be a recurring perpetual expenditure that you have to make like salary for example right salary quite clearly falls under revenue expenditure or operating expenses and not capital expenditure so this should be the kind of expense you do expense you incur only once and once and for all like you buy that particular piece of land once you have to keep on buying that land over and over again you build that particular factory once and for all so these kind of expenses have to be capital expenditure but that is just one of the criteria the next criterion according to lord gave is that this expenditure expenditure should be made with a view to bringing into existence an asset or an advantage an asset should be creat

Thanks geriretzy your participation is very much appreciated
- Shelton Nitti

About the author

Shelton Nitti

I've studied geotechnical engineering at San Francisco Conservatory of Music in San Francisco and I am an expert in chemical biology. I usually feel recumbent. My previous job was carpenter's assistant I held this position for 27 years, I love talking about flying and singing. Huge fan of Avril Lavigne I practice modern pentathlon and collect beer cans.