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Intangible property

Intangible property is a money term you need to understand. Here’s what it means.

What is intangible property?

Intangible property is property that does not derive its value from physical attributes. Patents, software, trademarks and license are examples of intangible property. On the other hand, business furniture and equipment are examples of tangible personal property.

Deeper definition

The IRS defines intangible property as that which includes, but is not limited to, commercially transferable interest in items, included within the following categories:

  • Computer software.
  • Patents, inventions, formulae, processes, designs, patterns, trade secrets or know-how.
  • Copyrights and literary, musical or artistic compositions.
  • Trademarks, trade names or brand names.
  • Franchises, licenses or contracts.
  • Methods, programs, systems, procedures, campaigns, surveys, studies, forecasts, estimates, customer lists or technical data.

As you can see above, the concept of intangible property encompasses a great many categories, many related to creative or intellectual property. In an increasingly digital age, definition of and protection for this property is critical.

Businesses take great care to properly value their intellectual property, as it is considered an asset that must be accounted for on the company books.

Formulas for determining the worth of this property are complex and often require measuring the time invested in development of the property as well as the rarity or desirability of it.

Intangible property example

Tech companies like Apple and Google have great amounts of intangible property to maintain. From product patents and intellectual property, including proprietary software and business systems, to licenses and brand names, these companies have extensive intangible assets on their books.

Protecting these assets is critical to the continued operation of these companies because the intellectual manpower and creativity represented by this intangible property is the main product that they offer.

If you were in a creative industry and decided to start selling clothing patterns that you designed and drafted, these patterns would be considered intangible property. You would need to protect them for the sake of your brand name and for legal and accounting purposes.

Have any assets that qualify as intangible property? Check Bankrate’s glossary.




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