Revenue Ruling 2003-28

In one scenario, taxpayer X contributed a license to use a patent to a university that was a qualified charitable organization. X retained the right to license the patent to others. In a second scenario, taxpayer Y contributed a patent to the university under the condition that the university continue to employ a specific faculty member for the remaining life of the patent. If the faculty member stopped working for the university before the patent expired, the patent would revert to Y. In other words, Y’s patent contribution was subject to a conditional reversion. When Y contributed the patent, more than a remote likelihood existed that the faculty member would stop working for the university before the patent expired. In a third scenario, taxpayer Z contributed all of Z’s interests in a patent to the university. The transfer agreement between Z and the university provided that the university could not sell or license the patent for a three-year period following the transfer. However, the patent would not revert to Z even if the university broke the license-or-transfer restriction. The Internal Revenue Service (IRS) issued a revenue ruling discussing whether the taxpayers in the three scenarios could take charitable-contribution deductions based on the taxpayers’ patent-related contributions to the university.