26 U.S.C. § 1253
A transfer of a franchise, trademark, or trade name shall not be treated as a sale or exchange of a capital asset if the transferor retains any significant power, right, or continuing interest with respect to the subject matter of the franchise, trademark, or trade name.
For purposes of this section-
The term "franchise" includes an agreement which gives one of the parties to the agreement the right to distribute, sell, or provide goods, services, or facilities, within a specified area.
The term "significant power, right, or continuing interest" includes, but is not limited to, the following rights with respect to the interest transferred:
The term "transfer" includes the renewal of a franchise, trademark, or trade name.
Amounts received or accrued on account of a transfer, sale, or other disposition of a franchise, trademark, or trade name which are contingent on the productivity, use, or disposition of the franchise, trademark, or trade name transferred shall be treated as amounts received or accrued from the sale or other disposition of property which is not a capital asset.
Any amount described in subparagraph (B) which is paid or incurred during the taxable year on account of a transfer, sale, or other disposition of a franchise, trademark, or trade name shall be allowed as a deduction under section 162(a) (relating to trade or business expenses).
An amount is described in this subparagraph if it-
Any amount paid or incurred on account of a transfer, sale, or other disposition of a franchise, trademark, or trade name to which paragraph (1) does not apply shall be treated as an amount chargeable to capital account.
For purposes of determining the term of a transfer agreement under this section, there shall be taken into account all renewal options (and any other period for which the parties reasonably expect the agreement to be renewed).
26 U.S.C. § 1253
EDITORIAL NOTES
AMENDMENTS2004-Subsec. (e). Pub. L. 108-357 struck out heading and text of subsec. (e). Text read as follows: "This section shall not apply to the transfer of a franchise to engage in professional football, basketball, baseball, or other professional sport." 1996-Subsec. (d)(4). Pub. L. 104-188 provided that section 11701(i) of Pub. L. 101-508 shall be applied as if "subsection" appeared instead of "section" in the material proposed to be stricken. See 1990 Amendment note below.1993-Subsec. (d)(2) to (5). Pub. L. 103-66 added pars. (2) and (3) and struck out former pars. (2) relating to deduction of certain payments for transfer of a franchise, trademark, or trade name not treated as sale or exchange of capital asset, (3) relating to treatment of amounts paid or incurred on account of transfer, sale, or other disposition of a franchise, trademark, or trade name to which pars. (1) and (2) did not apply, (4) relating to renewals for purposes of determining term of transfer agreement under this section or period of amortization under this subtitle, and (5) relating to rules applicable to this subsection.1990-Subsec. (d)(4). Pub. L. 101-508, §11701(i), which directed the substitution of "under this section or any period of amortization under this subtitle for any payment described in this section" for "or any period of amortization under this section", was executed by making the substitution for "or any period of amortization under this subsection". See 1996 Amendment note above. 1989-Subsec. (d)(1). Pub. L. 101-239, §7622(a), substituted "serial payments" for "payments" in heading and amended text generally. Prior to amendment, text read as follows: "Amounts paid or incurred during the taxable year on account of a transfer, sale, or other disposition of a franchise, trademark, or trade name which are contingent on the productivity, use, or disposition of the franchise, trademark, or trade name transferred shall be allowed as a deduction under section 162(a) (relating to trade or business expenses)."Subsec. (d)(2). Pub. L. 101-239, §7622(b), designated existing provisions as subpar. (A), inserted subpar. heading, redesignated former subpars. (A) to (C) as cls. (i) to (iii), respectively, and former cls. (i) and (ii) of former subpar. (B) as subcls. (I) and (II), respectively, of cl. (ii), and added subpar. (B). Subsec. (d)(3) to (5). Pub. L. 101-239, §7622(c), added pars. (3) to (5).1976-Subsec. (d)(2)(C). Pub. L. 94-455 struck out "or his delegate" after "Secretary".
STATUTORY NOTES AND RELATED SUBSIDIARIES
EFFECTIVE DATE OF 2004 AMENDMENT Amendment by Pub. L. 108-357 applicable to property acquired after Oct. 22, 2004, see section 886(c)(1) of Pub. L. 108-357, set out as a note under section 197 of this title.
EFFECTIVE DATE OF 1993 AMENDMENT Amendment by Pub. L. 103-66 applicable, except as otherwise provided, with respect to property acquired after Aug. 10, 1993, see section 13261(g) of Pub. L. 103-66, set out as an Effective Date note under section 197 of this title.
EFFECTIVE DATE OF 1990 AMENDMENT Amendment by Pub. L. 101-508 effective, except as otherwise provided, as if included in the provision of the Revenue Reconciliation Act of 1989, Pub. L. 101-239, title VII, to which such amendment relates, see section 11701(n) of Pub. L. 101-508, set out as a note under section 42 of this title.
EFFECTIVE DATE OF 1989 AMENDMENT Amendment by Pub. L. 101-239 applicable to transfers after Oct. 2, 1989, but not applicable to any transfer pursuant to a written binding contract in effect on Oct. 2, 1989, and at all times thereafter before the transfer, see section 7622(c)[(e)] of Pub. L. 101-239, set out as a note under section 167 of this title.
EFFECTIVE DATESection applicable to transfers after Dec. 31, 1969, except that subsec. (d)(1) shall, at the election of the taxpayer (made at such time and in such manner as the Secretary or his delegate may by regulations prescribe), apply to transfers before Jan. 1, 1970, but only with respect to payments made in taxable years ending after Dec. 31, 1969, and beginning before Jan. 1, 1980, see section 516(d)(3) of Pub. L. 91-172, set out as a note under section 1001 of this title.
- Secretary
- The term "Secretary" means the Secretary of the Treasury or his delegate.
- taxable year
- The term "taxable year" means the calendar year, or the fiscal year ending during such calendar year, upon the basis of which the taxable income is computed under subtitle A. "Taxable year" means, in the case of a return made for a fractional part of a year under the provisions of subtitle A or under regulations prescribed by the Secretary, the period for which such return is made.
- taxpayer
- The term "taxpayer" means any person subject to any internal revenue tax.
- trade or business
- The term "trade or business" includes the performance of the functions of a public office.