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§ 9.26 INTELLECTUAL PROPERTY2003, the IRS issued a news release urging prospective donors to inquire as to theamount of proceeds the charity would receive as the result of such a gift, andreminding donors of the valuation and recordkeeping requirements. 601§ 9.26 INTELLECTUAL PROPERTYA person may contribute intellectual property, by means of transfer of a patent, alicense to use a patent, or otherwise, to a charitable organization. The tax consequencesof such a contribution are numerous.A contribution to a charitable organization of a patent can result in a charitablededuction. The same is true as to a contribution to a charitable organizationof a license to use a patent. When, however, a person contributes to a charity alicense to use a patent but retains a substantial right in the patent (such as theright to license the patent to others or the right to use the patent or license in certaingeographical areas), the transaction constitutes a nondeductible transfer of apartial interest. 602A person may transfer to a charitable organization a patent subject to a conditionalreversion. If, on the date of the contribution, the transfer may bedefeated by the performance of an act or the happening of an event, a charitablecontribution deduction is not allowed, unless the possibility that the act or eventwill occur is so remote as to be negligible. This rule applies in the context oftransfers of patents. 603A person may transfer to a charitable organization a patent subject to alicense or transfer restriction. Such a restriction reduces what would otherwisebe the fair market value of the patent at the time of the contribution and thereforereduces the amount of the charitable contribution deduction. 604The IRS has become aware that some taxpayers have transferred or aretransferring patents or other intellectual property to charitable organizationsand are or will be claiming charitable contribution deductions in excess of theamounts to which they are entitled. The agency identified purported charitablecontributions of intellectual property in which one or more of the followingissues were present: there was a transfer of a nondeductible partial interest inthe property, the person transferring the property expected or received a benefitin exchange for the transfer, 605 there was inadequate substantiation of thecontribution, 606 and/or there was overvaluation of the intellectual propertytransferred. 607As to the second of these elements, the IRS stated that, as an example, if adonation agreement provides that the donee assumes the transferor’s liabilityfor a lease of a research facility, this assumption of liability is consideration providedby the donee. Likewise, a donee’s promise to make available to the transferorthe results of the donee’s research, such as laboratory notebooks, data, and601 IR-2003-129.602 See § 9.23, text accompanied by note 558; § 15.3, text accompanied by note 54.603 See § 10.4(a), text accompanied by note 133.604 See § 10.1(a), text accompanied by note 25605 See § 3.1(b).606 See § 21.1(b).607 Notice 2004-7, 2004-3 I.R.B. 310. 349