R&D Calculation for S corp

Technical topics regarding tax preparation.
#1
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365
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7-May-2014 1:13pm
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DC Metro
Hi Pros, I hope everyone is well. We are working with a client who has 168k of Qualified Research Expenses. They have been open since 2003. They probably have had R&D expenses ever since they opened and never looked into it ☹. They are a new client for us for 2018 (s corp) and we were going to apply for the credit. If we calculate the regular credit electing the 280C election they will get around 13k versus 8k for the simplified credit. The thing is for the regular credit do we act like they never took the credit, which they did not and start with the fixed base percentage of 3%. It seems so based on this article: https://www.journalofaccountancy.com/ne ... redit.html. Any help here would be great. Thank you.
 

#2
Noobie  
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Jacksonville, FL
No idea, sorry.
 

#3
Wiles  
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21-Apr-2014 9:42am
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CA
I have a client in a similar situation that paid big bucks for a fancy report resulting in large QRE's for the last three years. The credit consultant (not authority) is telling me to use 16% because they have had QREs since inception even though only started claiming 5 years ago.
 

#4
Coddington  
Moderator
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Fort Worth, TX
Yeah, tell the client to find a new consultant Wiles. (I answered this question for the OP in a different forum.) If they paid big bucks, they need a properly developed fixed base, because taxpayers that cannot show a properly determined fixed base can have the whole credit denied. See the Quebe case. In the past, (and, it appears, the present), some R&D consultants have used 16% when they "knew" the taxpayer would end up with the statutory max fixed base. Except they don't really know and they can't prove anything on audit without doing the work they should have done in the first place. Better to take the ASC and avoid these risks. Or hire a competent preparer in the first place.
-Brian

Director of Tax Accounting Methods & Credits
SourceAdvisors.com

Opinions my own.
 


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