Business Etiquette
_____ can view your email correspondence to a client.
Anyone
The new Section 174 capitalization requirements impact cashflow for up to __ years.
15
Amounts payable under any agreement that are contingent on the success of the research, and thus paid for the product or result of the research (Treas. Reg. § 1.41-4A(d)(1)).
Financial Risk
The controlled group is treated as a single taxpayer. Therefore, the gross receipts (GRs) and QREs for the controlled group must be combined in order to calculate the research credit for the group. IRC § 41(f)(1)(A)(i)
Aggregation
When clients are developing internal-use software, the activities are required to meet the R&D Four Part Test and the High Threshold of Innovation Test.
The High Threshold of Innovation Test includes...
1) Innovative - The software results in a reduction in cost, improvement in speed or other measurable improvement that is substantial and economically significant.
2) Significant Economic Risk - Substantial resources are committed, and because of the technical risk, there is substantial uncertainty that resources will be covered within a reasonable period.
3) Not Commercially Available - The desired software is not commercially available without substantial modification.
Your personal brand is made up of vision, core values, personality, and _________.
Differentiation
In the construction industry, taxpayers can minimize the impact of Section 174 capitalization in tax year 2022 if they utilize the _____________ accounting method and have ___________ contracts.
1) Percentage of Completion
2) Long Term
Treas. Reg. § 1.41-2(e)(1)(ii) — Services which, if performed by employees of the taxpayer, would constitute qualified services within the meaning of section 41(b)(2)(B).
Contract Research
A group is under common control if 5 or fewer persons own stock possessing at least 80% of the total profit interests or shares. And, taking into consideration each person's ownership only to the extent of that person's minimum ownership in any one of the corporations in the group, such persons are in Effective Control – more than 50% of the total profit interests or shares . Treas. Reg. § 1.52-1(d)(1)-(3)
Brother-Sister Common Control
Josh H. Corporation manufactures high-tech robots. The company has multiple offices around the United States including California, Texas, Florida, and Washington. How are qualified supplies allocated between the different locations?
Based on where the supplies are used or consumed in the research process.
The exchange of information and ideas.
Communication
The following states currently do not conform to Section 174: California, Indiana, Kentucky, New Hampshire, Rhode Island, Tennessee, Texas, ________
Wisconsin
Contract Research -
The contract or agreement for the contract research must be:
(1) Substantial Rights: Provide the research is to be performed on behalf of the taxpayer; and
(2) Financial Risk: Require the taxpayer to bear the expense of the research even if the project is not successful (Treas. Reg. § 1.41-2(e)).
(3) Entered into ____________ of the qualified research
Prior to the performance
Once the group credit is calculated, the credit is allocated to each member of the controlled group based on that members proportionate share of total QREs. IRC § 41(f)(1)(A)(ii)
Allocation
In 2021, Liddy Steele Milling Corporation had eight employees performing mechanical engineering services that were considered R&D activities. These employees were paid $80,000 each and spent 100% of their time on these services. In 2022, the company outsourced their mechanical engineering services. These vendors were paid $600,000 in total. What is the difference in qualified research expenses in 2021 vs. 2022?
2021 = $80,000 * 8 = $640,000
2022 = $600,000 * 65% = $390,000
Difference = $640,000 - $390,000 = $250,000
The purpose of communication is to build rapport, engagement, trust, and ______.
Loyalty
DCN Statement 265 must include the following:
1) Name and EIN/SSN of applicant
2) Beginning and ending dates of first taxable year 174 takes effect
3) Designated automatic accounting method change number ("265")
4) Description of type of expenditures included as R&E
5) Amount of specified R&E paid or incurred
6) __________________________
Declaration of method change
The document pair for a Master Services Agreement.
Statement of Work
Attribution from Estates or Trusts – Stock owned, directly or indirectly, by or for an estate or trust shall be considered as owned by any beneficiary who has an actuarial interest of ___ or more in such stock, to the extent of such actuarial interest. IRC § 1563(e)(3)(A).
5%
Ash made $200,000 working as a software engineer during 2022. Ash worked a total of 2,267 hours during the year. Ash spent 1,1767 hours on software R&D development activities. The remaining time was spent on admin. How much of Ash's wages are included as qualified wages during 2022?
$155,889
In order to allow the client to focus on one person's questions during an interview, one team member should _____ and the other team member should _____ during the call.
2) Take Notes
BONUS ROUND! Each team has a chance to write down answers to this question. Each team will share their answers. The team with the most correct answers wins the 500. If there is a tie, the points go to the team that picked this category first or if the other two teams tie they both get 500.
What is not considered R&E per Treas. Reg. 1.174-2(a)?
Looking for 7 specific answers
1) The ordinary testing or inspection of materials or products for quality control (quality control testing).
2) Efficiency surveys
3) Management studies
4) Consumer Surveys
5) Advertising and promotions
6) Acquisition of another's patent, model, production, or process
7) Research in connection with literacy, historical, or similar projects.
In a Funded Research scenario - if the client provides us with a Purchase Order, the client is most likely called the ________ or ________.
Both answers required.
Supplier or Vendor
Josh owns 70% of Star Co., 60% of Travis Co., 25% of Peter Co., and 80% of Tom Co.
Maya owns 10% of Star Co., 20% of Travis Co., 25% of Peter Co., and 10% of Tom Co.
Jay owns 10% of Star Co., 10% of Travis Co., 25% of Peter Co., and 10% of Tom Co.
Cassie owns 10% of Star Co., 10% of Travis Co., 25% of Peter Co., and 0% of Tom Co.
All entities are S-Corporations.
What type of controlled group is this and what entities are included?
Star Co., Travis Co., Peter Co.
Christina Corp. provides software development services. This requires the usage of many computers. What are the requirements for rental or lease costs of computers to be considered a qualified expense?
1) Offsite hosting for development or staging environments
2) Servers must be owned and operated by 3rd party