83 STAT. ] (c)
PUBLIC LAW 91-172-DEC. 30, 1969
647
TRANSFERS OF FRANCHISES, TRADEMARKS AND TRADE XAMES.—
(1) IN GENERAL.—Part IV of subchapter P of chapter 1 (relating to special rules for determining capital gains and losses) is amended by adding after section 1252 (added by section 214 of this Act) the following new section:
26 USC 12311252. Ante,
p. 572.
"SEC. 1253. TRANSFERS OF FRANCHISES, TRADEMARKS, AND TRADE NAMES.
(a) GENERAL RULE.—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 powder, right, or continuing interest with respect to the subject matter of the franchise, trademark, or trade name. "(b) DEFINITIONS.—For purposes of this section— "(1) FRANCHISE.—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. "(2)
SIGNIFICANT POWER, RIGHT, OR CONTINUING INTEREST.—
The term 'significant power, right, or continuing interest' includes, but is not limited to, the following rights with respect to the interest transferred: " (A) A right to disapprove any assignment of such interest, or any part thereof. " (B) A right to terminate at will. " (C) A right to prescribe the standards of quality of products used or sold, or of services furnished, and of the equipment and facilities used to promote such products or services. " (D) A right to require that the transferee sell or advertise only products or services of the transferor. " (E) A right to require that the transferee purchase substantially all of his supplies and equipment from the transferor. " (F) A right to payments contingent on the productivity, use, or disposition of the subject matter of the interest transferred, if such payments constitute a substantial element under the transfer agreement. "(3) TRANSFER.—The term 'transfer' includes the renewal of a franchise, trademark, or trade name. "(c)
TREATMENT OF CONTINGENT PAYMENTS BY TRANSFEROR.—
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. "(d)
TREATMENT OF PAYMENTS BY TRANSFEREE.— "(1) CONTINGENT PAYMENTS.—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). "(2) OTHER PAYMENTS.—If a transfer of a franchise, trademark, or trade name is not (by reason of the application of subsection (a)) treated as a sale or exchange of a capital asset, any
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