J.K. Lasser's Your Income Tax 2013: For Preparing Your 2012 Tax Return

9.13 Deducting the Cost of Patents or Copyrights

If you create an artistic work or invention for which you get a government patent or copyright, you may depreciate your costs over the life of the patent or copyright. Basis for depreciation includes all expenses that you are required to capitalize in connection with creating the work, such as the cost of drawings, experimental models, stationery, and supplies; travel expenses to obtain material for a book; fees to counsel; government charges for patent or copyright; and litigation costs in protecting or perfecting title.

If you purchased the patent or artistic creation, depreciate your cost over the remaining life of the patent or copyright. If your cost for a patent is payable annually as a fixed percentage of the revenue derived from use of the patent, the depreciation deduction equals the royalty paid or incurred for that year. However, if a copyright or patent is acquired in connection with the acquisition of a business, the cost is amortizable over a 15-year period as a Section 197 intangible (42.18).

If you inherited the patent or rights to an artistic creation, your cost is the fair market value either at the time of death of the person from whom you inherited it (5.17) or the alternate valuation date if elected by the executor. You get this cost basis even if the decedent paid nothing for it. Figure your depreciation by dividing the fair market value by the number of years of remaining life.

If your patent or copyright becomes ...