Section 467 loan. (a) In general—(1)
Section 467 loan. Pursuant to the Section 467 Regulations, Licensor is required for income tax purposes only, to treat a portion of Licensee’s pre-payment of the Annual Fees as if it were a loan from Licensee to Licensor (the “Section 467 Loan”). For income tax purposes, Licensor will recognize both the license fee income (in the amount shown in Column C labeled “IRC § 467 Fees” in the table on Schedule 1 to this Addendum) and interest expense (in the amount shown in Column D labeled “Section 467 Interest”); and Licensee will recognize the license fee expense and interest income in the same respective amounts. For every Agreement Year in which such interest income arises under the Section 467 Regulations, Licensor will issue to Licensee an appropriate Form 1099 reflecting the amount of interest income deemed to have arisen, for income tax purposes, in connection with the balance of the Section 467 Loan. No cash interest payments will be made to Licensee. Licensee is advised to consult with its tax advisors regarding the treatment of this Agreement for tax purposes.
