Business Services Industry
Allocation of employee stock options to cost-sharing agreement.
Tax Adviser, The, November, 2005 by O'Driscoll, David
P is in the business of researching, developing, manufacturing, marketing and selling field-programmable logic devices, integrated circuit devices and other development software systems. P entered into a cost-sharing agreement to develop intangibles with X, its foreign subsidiary.
The Agreement
Under the cost-sharing agreement, all new technology developed by either P or X would be jointly owned. Each party was required to pay a percentage of the total research and development (R&D) costs, based on its anticipated benefits from the intangibles. P issued stock options to its employees performing R&D. However, for purposes of determining the cost allocation under the agreement, P did not include the cost of issuance or exercise of such options in R&D...
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