How do we value IP for tax purposes or purchase price allocation?

After an acquisition closes, accounting standards (ASC 805 in the US) require the purchase price to be allocated at fair value across what was bought: tangible assets, identifiable intangibles such as patents, developed technology, trademarks, and customer relationships, and the residual, which becomes goodwill. For patents and technology, the workhorse methods are relief from royalty, which values the asset by the licensing cost it spares the owner, and multi-period excess earnings for the primary income-producing asset.

Two inputs drive the patent numbers and both are IP questions before they are accounting questions: the supportable royalty rate, and the remaining useful life, which is an economic judgment about technology cycles and claim relevance, not just the years left on the legal term. Those inputs set the amortization schedule the company lives with for years, and they are where auditors push.

Transfer pricing is the big one: moving IP between related entities across borders requires arm's-length valuation under IRS Section 482 and its international counterparts, with documentation standards that tax authorities actively test. Patent donations, estate matters, and IP holding-company structures each carry their own valuation and documentation requirements. We are deliberate about the boundary here: the tax position, the filing, and the defense of either belong to your tax advisors and accountants. Route the 'what can we deduct' and 'will this structure hold' questions to them.

What those professionals need underneath their work, and what general accounting practices often lack, is the IP substance: which patents actually protect which revenue, how strong the patents are, what royalty the market evidence supports, and how long the technology realistically stays relevant.

We supply the analysis the signing professionals rely on: patent-to-product mapping, patent strength assessment, economic-life analysis, royalty-rate support drawn from market evidence, and portfolio tiering. Our ipValue Model has supported more than $2 billion in cumulative transaction value, much of it feeding exactly these downstream uses. Engagements at this depth typically sit in our transaction-grade tier, starting around $50,000, scoped jointly with your accounting team so the work product drops cleanly into their model.