Cf. sec. 1.167(a)-6(a), Income Tax Regs. If, however, the sales price of a patent is expressed by a formula by which a fixed dollar amount cannot be ascertained until future years (such as royalties which are a fraction of sales), the purchaser may deduct each year as depreciation only the amount of the purchase price actually paid or payable. Newton Insert Co. v. Commissioner, 61 T.C. 570 (1974), affd. per curiam 545 F.2d 1259 (9th Cir. 1976); Associated Patentees, Inc. v. Commissioner, 4 T.C. 979 (1945). Respondent argues that while it may have been difficult, the options could have been valued in 1960 when they were granted and the underlying shares were reserved.

Held: (1) Royalties paid by Best Lock under the 1949 licenses are consideration for the transfer of patents and it is entitled to deductions for depreciation in these amounts, following Associated Patentees, Inc., 4 T.C. 979 (1945). (2) Royalties paid to Best and Foundation are taxable to each as long-term capital gains.

See Associated Patentees, Inc., 4 T.C. 979. In the third place, the years before us are subsequent to the end of both the life and life expectancy of the life tenant.

The Court first held that no partnership or joint venture existed between the taxpayer and the seller; then that the monthly payments to the seller were capital investments which had to be capitalized and recovered when the business was sold and the same were not subject to be depreciated because they were payable over an entirely unascertainable future period. And in Shufflebarger v. Commissioner of Internal Revenue, 24 T.C. 980 and Associated Patentees v. Commissioner of Internal Revenue, 4 T.C. 979, we find situations where grazing preferences or leases had been sold to a taxpayer who desired to depreciate the same but depreciation was not allowed for the reason that the grazing preferences or leases were of indefinite duration and there was no ascertainable amortization period for the purpose of depreciation. Then in Coca Cola Bottling Company v. Commissioner of Internal Revenue, in 6 B.T.A. 1333, we find that a Coca Cola franchise is not depreciable because it is of indefinite duration and is an intangible property.

Under certain circumstances and in certain contexts such an imprecise expression of assignment or sale could be so construed. Reid v. Commissioner, 26 T.C. 622; Associated Patentees, Inc., v. Commissioner, 4 T.C. 979; Daily v. Universal Oil Products Co., D.C.D.Ill., 76 F. Supp. 349; and Pike v. United States, D.C.D.Conn., 101 F. Supp. 100. These and other cases also state that the use of the word "license" instead of the words "assign" or "sell" is not in itself conclusive.

Associated Patentees, Inc., 4 T.C. 979). Opinion on rehearing 1945; published by the Commissioner of Internal Revenue-1-C.B. 1); Hershey Manufacturing Co. v. Commissioner, 1928, 14 B.T.A. 867, affirmed 10 Cir., 1930, 43 F.2d 298; Commissioner of Internal Revenue v. Stephens-Adamson Mfg. Co., 7 Cir., 1931, 51 F.2d 681.

After the transfer, he no longer owns any property of a character subject to ‘exhaustion, wear and tear,‘ nor does he require a ‘reasonable allowance‘ for depreciation to recover his basis in the patents. Cf. Newton Insert Co. v. Commissioner, 61 T.C. at 570 (where transferor has conveyed his substantial rights in a patent, transfer is a sale, and transferee is entitled to depreciation); Best Lock Corp. v. Commissioner, 31 T.C. 1217 (1959); Associated Patentees, Inc. v. Commissioner, 4 T.C. 979 (1945). LaSala, having sold its rights in the inventions simultaneously with its acquisition of such rights, neither ‘used‘ such rights in a trade or business, nor ‘held‘ such rights for the production of income, within the meaning of section 167(a).

In Associated Patentees, Inc., 4 T.C. 979 (1945), we held that since a transfer of patents in return for 80 percent of the income generated by their use was found to be a purchase of capital assets with a determinable useful life, the purchaser was entitled to deduct the percentage payments, but only as depreciation of the cost of the patents. Petitioner relies on M. E. Cunningham Co., T. C. Memo. 1951-81.

In Associated Patentees, Inc., 4 T.C. 979 (1945), we held that since a transfer of patents in return for 80 percent of the income generated by their use was found to be a purchase of capital assets with a determinable useful life, the purchaser was entitled to deduct the percentage payments, but only as depreciation of the cost of the patents. Petitioner relies on M. E. Cunningham Co., T. C. Memo. 1951-81.

"[where] the purchase price of the patents * * * is contractually fixed as a reasonable percentage of the annual earnings from such patents * * * over the period of their remaining lives, the taxpayer-purchaser may deduct a sum equal to the payments made during the taxable year on the purchase price of such patents * * * as an allowance for depreciation under section 167 of the Code. See Associated Patentees, Inc. v. Commissioner, 4 T.C. 979 (1945) * * * [Emphasis supplied.]"