- 51 -
OPINION
A. The Criteria That Must Be Satisfied for Expense Treatment
Under Section 174
Section 174(a)(1)18 states, as a general rule, that
"research or experimental expenditures which are paid or incurred
by * * * [a taxpayer] during the taxable year in connection with
his trade or business", may, at the election of the taxpayer, be
treated as expenses not chargeable to capital account. The
expenditures so treated shall be allowed as a deduction. Sec.
174(a)(1). A taxpayer is entitled to a deduction for research
and experimental expenditures with respect to expenses paid or
incurred by the taxpayer directly as well as expenses paid or
18 Sec. 174 provides in pertinent part:
SEC. 174. RESEARCH AND EXPERIMENTAL EXPENDITURES.
(a) Treatment as Expenses.--
(1) In general.--A taxpayer may treat research or
experimental expenditures which are paid or incurred by him
during the taxable year in connection with his trade or
business as expenses which are not chargeable to capital
account. The expenditures so treated shall be allowed as a
deduction.
* * * * * * *
(c) Land and Other Property.--This section shall not apply
to any expenditure for the acquisition or improvement of land, or
for the acquisition or improvement of property to be used in
connection with the research or experimentation and of a
character which is subject to the allowance under section 167
(relating to allowance for depreciation, etc.) or section 611
(relating to allowance for depletion); but for purposes of this
section allowances under section 167, and allowances under
section 611, shall be considered as expenditures.
Page: Previous 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 NextLast modified: May 25, 2011