Nicholas E. Eustace, et al. - Page 10




                                       - 10 -                                         
          agencies).  Diamond would manage and update policies to reflect             
          customer transactions.                                                      
                    5.  Evaluations/R&D                                               
               Applied Systems’ evaluations/R&D work consisted of                     
          evaluating and developing, by the creation of short routines,               
          compatibility between TAM and third–party hardware and software             
          products.                                                                   
          II.  Credit Claimed                                                         
               On its 1990, 1991, and 1992 tax returns (i.e., Forms 1120S,            
          U.S. Income Tax Returns for an S Corporation), Applied Systems              
          did not claim any research credit.  On December 30, 1993, Applied           
          Systems hired a new tax manager, who determined that Applied                
          Systems should claim research credits relating to the years in              
          issue.  The tax manager interviewed employees and delineated the            
          employees and activities that he believed qualified for the                 
          research credit.  On June 24, 1994, and August 30, 1995, Applied            
          Systems submitted amended returns, relating to the 3 years in               
          issue, to claim the respective research credit “that was                    
          erroneously omitted from the original filing of the Form 1120S.”            
          On the amended returns, Applied Systems claimed research credits            
          of $235,536, $127,426, and $289,449, relating to the wages of 227           
          employees in 1990, 1991, and 1992, respectively.  Petitioners,              
          pursuant to amended pleadings filed in April 1997, added the                
          wages of 21 employees (i.e., $635,371) to their claim.                      






Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  Next

Last modified: May 25, 2011