Apple recently got a verdict against Samsung for $120 million in a patent infringement case, much less than the $2.2 billion Apple had originally sought. Should Apple ever collect that judgment, it will be ordinary income, tax attorney Rob Wood explains, and the sum will be a business expense for Samsung. And in the Apple v. Samsung litigation, attorneys’ fees will be a business expense for both parties.
The situation is not always this simple for businesses contemplating damages recoveries in patent litigation and intellectual property litigation. There are some planning opportunities, Wood explained. The tax rules are complicated and can be confusing and somewhat unfair. A smaller company in litigation of this sort may find that it cannot deduct the legal fees (and on which the law firm will have to pay income tax).
In Wood’s Forbes article, “Taxing Apple's $119.6 Million Patent Verdict Against Samsung,” he discusses Section 1235 capital gains treatment and other possibilities for getting some relief from a larger tax payment.
For more information on the subject, please refer to Mr. Wood’s article in Forbes. Robert Wood is a tax attorney with Wood, LLP in San Francisco, California and spoke with The Tax Law Channel, an affiliate of The Legal Broadcast Network. The Legal Broadcast Network is a featured network of the Sequence Media Group.