Principal Issues: [TaxInterpretations translation]
What is the tax treatment of amounts received by taxpayers upon the transfer of intellectual property in a given situation?
Position: None.
Reasons: Question of fact.
XXXXXXXXXX Marie Lamarche, M. Fisc. 2020-084593
March 11, 2025
Dear XXXXXXXXXX,
Subject: Transfer of intellectual property
This letter is in response to your email of April 14, 2020 in which you asked for our comments on the tax treatment of sums received by taxpayers when transferring intellectual property in a particular situation.
Briefly, you have described a situation in which university researchers develop intellectual property as part of their employment. In order to encourage innovation and commercialization, the university is responsible in most situations for the protection, valorization and commercialization of intellectual property and grants university researchers the right to receive 50% of the net income arising from the commercialization.
However, you stated that, in all cases, the university assigns all its rights and obligations with regard to intellectual property to a limited partnership for the exploitation of intellectual property, of which it is the sole limited partner. The rights and obligations of the university are therefore all assumed by this limited partnership.
More specifically, you are asking about the tax treatment of a lump sum received by university researchers and the limited partnership when the latter transfers intellectual property to an unrelated third party.
Our Comments
This technical interpretation provides general comments about the provisions of the Act and related legislation. It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC70-6R12, Advance Income Tax Rulings and Technical Interpretations
Determining the nature of a sum received by taxpayers on a transfer of intellectual property and its tax treatment are questions of fact that cannot be resolved without a thorough examination of the facts and particularities of each situation, including the agreements (written or verbal) between the parties and the applicable private law. Those determinations depend on a number of factors, including the right of ownership with regard to intellectual property and the nature of the legal relationship between the parties.
Given that your request for technical interpretation only summarily presents a hypothetical situation, it is impossible for us to make general comments regarding your question.
However, as previously stated, our Directorate can carry out a full examination of all the facts and all the relevant legal documents relating to a particular situation as part of a request for advance decisions regarding proposed transactions (submitted as described in Information Circular IC 70-6R12). Otherwise, that examination normally falls within the remit of a Tax Services Office as part of a tax audit following the filing of an income tax return.
Best regards,
Isabelle Landry
Section Manager
Businesses and Employment Income Section
Businesses and Employment Income Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch