Norwest Corporation and Subsidiaries - Page 80

                                       - 54 -                                         

          358, and to "encourage business firms to perform the research               
          necessary to increase the innovative qualities and efficiency of            
          the U.S. economy", S. Rept. 99-313, at 694 (1986), 1986-3 C.B.              
          (Vol. 3) 1, 694; H. Rept. 99-426, at 177 (1985), 1986-3 C.B. (Vol.          
          2) 1, 177.                                                                  
               ERTA adopted the definitions of "research" and                         
          "experimentation" as those terms are generally defined under                
          section 174.  ERTA sec. 221(a).33  ERTA failed to address how               

               33   ERTA sec. 221(a) defined qualified research as follows:           
               For purposes of this section the term "qualified                       
               research" has the same meaning as the term research or                 
               experimental has under section 174, except that such                   
               term shall not include--                                               
                    (1) qualified research conducted outside of the                   
               United States,                                                         
                    (2) qualified research in the social sciences or                  
               humanities, and                                                        
                    (3) qualified research to the extent funded by any                
               grant, contract, or otherwise by another person (or any                
               governmental entity).                                                  
               In TSR, Inc. & Sub. v. Commissioner, 96 T.C. 903 (1991), we            
          considered a taxpayer's claim to the R&E credit under then sec.             
          44F for 1981.  The taxpayer, a manufacturer of historical and               
          fantasy games, sought the credit for its historical research into           
          the development of the games.  In considering the taxpayer's                
          claim, we applied the plain meaning to the terms "experimental"             
          ("relating to, or based on [experiment]") and "laboratory" ("a              
          place devoted to experimental study in any branch of natural                
          science or to the application of scientific principles in testing           
          and analysis").  We ultimately rejected the taxpayer's claim                
          because we found that the R&E credit was originally intended by             
                                                             (continued...)           





Page:  Previous  44  45  46  47  48  49  50  51  52  53  54  55  56  57  58  59  60  61  62  63  Next

Last modified: May 25, 2011