Among the Internal Revenue Code’s many rules are some taxpayer-friendly provisions that grant tax benefits. Section 1235 is one such provision, providing to an inventor preferential tax treatment for income from the sale or exchange of a patent. In Cooper v. Commissioner, although the taxpayer inventor satisfied § 1235’s requirements, the Ninth Circuit affirmed the Tax Court’s decision to deny the taxpayer § 1235’s benefits. This Note compares Cooper to other § 1235 cases and argues that Cooper was decided wrongly because of the application of the substance over form doctrine. The substance over form doctrine is overapplied in general and, in light of the Code’s decades of development, may no longer be necessary. Additionally, because taxpayers require clarity in order to arrange their affairs, Congress should clarify the Code’s new internal inconsistency regarding the treatment of income from the sale or exchange of patents resulting from the Tax Cuts and Jobs Act.
Rebecca R. Dulik,
Cooper v. Commissioner: Give the Inventor a (Learned) Hand,
Me. L. Rev.
Available at: https://digitalcommons.mainelaw.maine.edu/mlr/vol71/iss1/7