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Question 3 Mrs. A. spent $25,000 during Year 2 and $35,000 during Year 3 on “research and experimentation” activities described in Section 174 of the Code.  She had never heard of section 174, however, so she capitalized these amounts into an asset she characterized as “Research and Development.” She spent another $50,000 on these activities in Year 4 but, before she filed her return for Year 4, she became aware of Section 174.  By the end of Year 4, she was almost ready to declare her research complete and undertake to patent and exploit the results.What amount(s) should Mrs. A report in Year 4 with respect to her research and development activities?    My professory came up with $0 for each year. I am not sure why.

Question

Question 3

 

Mrs. A. spent $25,000 during Year 2 and $35,000 during Year 3 on “research and experimentation” activities described in Section 174 of the Code.  She had never heard of section 174, however, so she capitalized these amounts into an asset she characterized as “Research and Development.” She spent another $50,000 on these activities in Year 4 but, before she filed her return for Year 4, she became aware of Section 174.  By the end of Year 4, she was almost ready to declare her research complete and undertake to patent and exploit the results.

What amount(s) should Mrs. A report in Year 4 with respect to her research and development activities?   

 

My professory came up with $0 for each year. I am not sure why.

check_circleAnswer
Step 1

Section 174:

 

As per this, if a taxpayer incurred or paid research or experimentation expenditure during the taxable year it can be tr...

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