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Although the TAM module, FIM, First Rate, Diamond, etc. do
not meet the requirements of section 41(d)(1), the research
credit may, nevertheless, be applicable to the most significant
set of elements of these products in relation to which all the
requirements are met. See H. Conf. Rept. 99-841 (Vol. II), at
II-72 to II-73 (1986), 1986-3 C.B. (Vol. 4) 1, 72-73.
Petitioners acknowledge that they do not have
the substantiation necessary to tie salaries to
activities at the subcomponent level, * * * . However,
the Cohen [sic] rule would apply in this circumstance,
and the Court would be required to make a reasonable
allocation of salaries to functionality.
The rule of Cohan v. Commissioner, 39 F.2d 540, 544 (2d Cir.
1930), does not require the Court, in this case, to make such an
allocation, and we decline to do so. Accordingly, respondent’s
determinations are sustained.
Contentions we have not addressed are moot, irrelevant, or
meritless.
To reflect the foregoing,
Decisions will be entered
under Rule 155.
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Last modified: May 25, 2011