Research and experimental ex­penses that are unrelated to the cur­rent product lines or manufacturing processes of a trade or business are, nevertheless, research and experi­mental expenditures within the meaning of section 174 of the Code.

Rev. Rul. 71-162


The taxpayer paid or incurred re­search and experimental expenditures in seeking to develop new products or processes although they were unrelated to the current product lines or manu­facturing processes of the taxpayer’s trade or business. Research and experi­mental expenditures described in sec­tion 174 of the Internal Revenue Code of 1954 and the regulations thereunder may be deducted, at the election of the taxpayer, if paid or incurred in con­nection with the taxpayer’s trade or business.

Held, research and experimental ex­penditures for new products or proc­esses, that are not related to the current product lines or manufacturing proc­esses of the taxpayer’s trade or business, are, nevertheless, research and experi­mental expenditures within the mean­ing of section 174 of the Code and the regulations thereunder. See Best Uni­versal Lock Co., Inc., et al. v. Commis­sioner, 45 T.C. 1 (1965), acquiescence, C.B. 1966-2, 4, in which it was held as to the issue in this case that the amounts expended by a taxpayer, a manufacturer and seller of locks, for research and development of products not related to locks, were research and experimental expenditures within the meaning of section 174 of the Code.

LET'S TALK

Do you have questions about the research tax credit? If so, we would like to hear from you.

Your Name (required)
Your Email (required)
Your Message