What Is Intangible Personal Property?

The term intangible personal property refers to an item of value that cannot be touched or physically held. These assets can be held by both individuals and corporations. Intangible personal property can be anything that has image, social, and reputational capital, along with digital, 澳洲幸运5官方开奖结果体彩网:copyrights, patents, and investments. Intangible personal property or intangible assets are the opposite of tangible personal property, which can be physically touched and come with a degree of value, such as machinery, jewelry, and electronics.

Understanding Intangible Personal Property

澳洲幸运5官方开奖结果体彩网:Personal property can be divided into a few different categories—notably tangible and intangible personal property. Tangible personal property is anything that can be held and has definitive value while intangible personal property is anything that doesn't have any obvious vℱalu♏e and can't be touched. We discuss the differences between the two a little further down.

The value in intangible personal property lies in the associated benefits and value recognition. 澳洲幸运5官方开奖结果体彩网:Intellectual property is one of the most common forms of this type of property. Other types of intangible personal property include life insurance contracts, securities investments, royalty agreements, and partnership interests. The most common forms of intangible property for companies include goodwill, 澳洲幸运5官方开奖结果体彩网:research and development (R&D), and patents.

Some forms of these intangible items are known as 澳洲幸运5官方开奖结果体彩网:capital assets and appear on a company's 澳洲幸运5官方开奖结果体彩网:financial statements while others are not included. For example, a company would list a trademark or patent as an asset on its 澳洲幸运5官方开奖结果体彩网:balance sheet.

The company may need to do in-depth research to determine a realistic 澳洲幸运5官方开奖结果体彩网:market price for intangible objects. Once a value is assigned to this property, the company may write off some of the cost of creating the object. An example may be the cost associated with compiling a custome♕r or client mailing list or hiring a lawyer to file a patent application.

Special Considerations

The Internal Revenue Service (IRS) does impose 澳洲幸运5官方开奖结果体彩网:capital gains taxes on any tangible property that individuals and corporations sell. But it can be cloudy when it comes to intangible assets. Since there is no actual physical shape to this type of property, it doesn't have an assigned or hard value, which makes it hard to account for and evaluate. As such, not all forms of intangible personal property are taxable.

Some types of intangible assets are, though, making them 澳洲🏅幸运5ꦛ官方开奖结果体彩网:eligible for capital gains or losses. Capital gains are realized when they're sold at a higher price while capital losses result from a lower price than the original purchase price. The value is determined by any intellectual or non-physical attributes. For instance, a musical composition may be taxed when it is sold to soꦯmeone else at a different price than when it was o꧋riginally purchased.

While tangible assets may be depreciated, the IRS requires that property owners amortize "over 15 years the capitalized costs" any intangibles that were purchased before August 1993. That's because they are commonly given a 15-year life. These refer to any assets held for the purpose of trade or business.

Intangible Personal Property vs. Tangible P꧒🥀ersonal Property

As noted above, intangible personal property is anything without obvious value that can't be physically manipulated. Tangible personal property, on the other hand, is anything that can be held and anything with discernable value. As such, it can be moved around.

Tangible assets can be used in the day-to-day operations of a business or by individuals in their daily lives. Examples include machinery, vehicles, jewelry, art, electronics, and furniture. Things like smartphones and collectibles also fall in this category.

This kind of personal property is subject to 澳洲幸运5官方开奖结果体彩网:depreciation. either on an accelerated basis or using the five- or seven-year periods. Taxation occurs on an 澳洲幸运5官方开奖结果体彩网:ad valorem basis, which requires the use of an appraiser to assess the value. It can also be taxed on the actual value—the difference between the sale and the purchase price.

Examples of Intangible Personal Property

Let's say Firm XYZ invented a liquid, that when rubbed on a tattoo, causes it to blend into the surrounding skin rendering it invisible. There is also a solvent used to remove the tattoo obstructing solution. Firm XYZ issues a patent for both formulas. The patent, which keeps others from copying the formulas, gives the company sole ownership rights over this invention for the duration of the patent.

The firm enjoys the financial benefits of being the sole seller of this breakthrough tattoo obstructing concoction. Those financial benefits can be represented by the patent, which does not have any inherent value itself but is valuable because of these future benefits. The company will include the patents as a capital asset and may write off some of the expenses required to list the patent