What does “intangible personal property” mean?

Some valuable things can’t be touched or handled. This kind of property is called “intangible personal property.” Both people and businesses can own these things. People can own intangible property like digital assets, copyrights, patents, and investments. It can also be image, social, and moral capital. Tangible personal property, like electronics, jewelry, and machinery, can be touched and have some value. Intangible personal property and intangible assets can’t be seen or felt.

How to Understand Intangible Property

There are a few types of personal property, including physical and intangible. Intangible personal property doesn’t have a clear value and can’t be felt. Tangible personal property is something that you can hold, and that has clear value. The differences between them are talked about a little further down.

Intangible personal property is worth what it’s worth because of the perks and value recognition that come with it. One type of this kind of property that is used a lot is intellectual property. Life insurance contracts, stock investments, royalty deals, and partnership interests are other types of intangible personal property. Goodwill, research and development (R&D), and patents are some of the most popular types of intangible property for businesses.

Some things that can’t be seen or touched are called capital assets and appear on a company’s financial records, but others don’t. When a business has an asset, it would list things like a brand or patent.

The business might have to study for a fair market price for things that can’t be seen or touched. The company may be able to write off some of the cost of making the item once it has value. That could be the cost of making a mailing list of customers or clients or paying a lawyer to file a patent application.

Personal property that can’t be seen or touched is sometimes called “incorpeal property.”

Unique Things to Think About

The Internal Revenue Service (IRS) collects capital gains taxes on all goods people and businesses sell. When it comes to intangible goods, though, things can get cloudy. As this kind of property doesn’t have a solid shape, it doesn’t have a complex value, which makes it challenging to keep track of and judge. Because of this, not all types of invisible personal property are taxed.

However, some kinds of intangible assets can have capital gains or losses. You gain capital when you sell something for more than you paid for it. On the other hand, when you sell something for less than you paid for it, you lose capital. Any intellectual or non-physical qualities count toward the value. An example of this would be taxing a piece of music sold to someone else at a different price than when it was first bought.

The IRS says that property owners must spread “over 15 years the capitalized costs” of any intangibles they bought before August 1993. Tangible assets can be written off at a lower value. That’s because most people give them 15 years to live. These are all the things that are owned for business or trade.

Thanks to the Tax Cuts and Jobs Act of 2017, some intangible assets may be treated as regular income. This group could be intellectual property, digital assets, or patents. It would help to talk to a tax expert about handling your intangibles.

What is the difference between physical and intangible personal property?

As was already said, invisible personal property is anything that doesn’t seem valuable and can’t be moved or changed physically. On the other hand, personal property that can be touched and has a clear value is called tangible personal property. Because of this, it can be changed.

Both businesses and people can use touchable things in their daily lives. Examples are machines, cars, jewelry, art, tech, and furniture. In this group are also things like smartphones and keepsakes.

This kind of personal property can lose value over time. Either more quickly or by using the five- or seven-year terms. Ad valorem taxation means that an estimator must determine how much something is worth. It may also be charged based on its actual value, the difference between what it sold for and bought for.

Real estate is not personal property because it can’t be moved, which is one of the things that makes something personal.

Personal property that can’t be seen or touched

Let’s say that Firm XYZ came up with a liquid that, when rubbed on a tattoo, makes it blend in with the skin around it, making it unnoticeable. A solvent is also used to remove the fluid that blocks the tattoo. Firm XYZ gets a patent for both of the methods. The patent gives the company complete control over the idea while the patent is still in effect. This means that no one else can copy the formulas.

The company makes a lot of money because it is the only one selling this revolutionary tattoo-blocking mixture. The patent can stand for these future financial benefits. The patent has no value but is essential because of these benefits. The rights will be listed as capital assets, and the company may be able to write off some of the costs it took to list them.

When it comes to assets, what kinds are intangible personal property?

Intangible personal property is anything that can’t be seen or touched and has no apparent value. Examples include intellectual property, investments, digital assets, copyrights, and anything else with image, social, or brand capital.

How are intangible and physical personal property different from each other?

Intangible personal property is any valuable thing that isn’t made of matter. Copyrights, patents, intellectual property, and investments are invisible personal property. Some intangible personal property can be expressed with social or reputational capital. The other type of personal property is tangible personal property. This includes things like jewelry, art, machinery, and gadgets that can be touched and have value.

Can you tax intangible property?

Because it doesn’t have a shape, intangible personal property can’t be given value. It’s hard to track and adequately judge them because of this. There are, however, some types of immaterial personal property that are taxed as capital gains. This happens when they are sold for more than what they bought. Physical and intellectual things give an asset its value and, by extension, any capital benefits from selling it. Precious things, like music, may bring capital gains when sold. Intellectual property, like patents and other types of patents, may be taxed the same as regular income.

Conclusion

• Personal property that can’t be seen or touched has value because it stands for something else.
• One type of intangible personal property that people often own is intellectual property.
• Image, social, brand capital, personal social media pages, and other digital assets are intangible personal property.
• Companies with patents, copyrights, life insurance contracts, stock investments, and partnership interests also own things that can’t be seen or touched.
• This is not the same as real personal property, including machinery, jewelry, electronics, and other things you can touch and give some value to.