Federal R&D Tax Credit Case Law

Quick Answer: Federal R&D Tax Credit Case Law

What is the Federal R&D Tax Credit Case Law? This comprehensive list details key legal decisions and Tax Court orders that have shaped the interpretation and application of the federal Research and Development (R&D) Tax Credit under IRC Section 41 and Section 174. These cases cover critical issues such as the funded research exclusion, internal-use software, process of experimentation, and strict substantiation requirements for Qualified Research Expenses (QREs).

Case Law Directory

Case Name	Summary
Amirikian v. United States	Examined if payments received under a research contract constituted excludable or non-qualifying funded research.
Apple Computer, Inc. v. Commissioner	Determined income from employee stock option spreads constituted eligible wages for the R&D credit.
Populous Holdings, Inc. v. Commissioner	Allowed R&D credit by ruling the architectural firm retained substantial rights in its designs.
Bayer Corp. v. United States	Addressed internal-use software qualification and discovery rule application under pre-2003 R&D tax regulations.
Best Lock Corp. v. Commissioner	Addressed whether standard patent and manufacturing costs qualified as experimental Section 174 research expenses.
Betz v. Commissioner	Ruled taxpayer failed to prove pilot models and proper substantiation for R&D supply credits.
Black & Decker Corp. v. United States	Evaluated contingent liabilities and qualified expenses within complex corporate reorganization tax strategies.
Burwell v. United States	Addressed strict officer compensation eligibility and specific substantiation rules for claiming R&D credits.
Caveney v. Commissioner	Examined state research credit pass-through eligibility and limitations for S corporation shareholders.
Chrysler Corp. v. Commissioner	Examined deductibility of automotive warranty expenses versus qualified engineering and developmental research activities.
Cleveland v. Commissioner	Examined whether an individual investor’s funding activities constituted a trade or business under Section 174.
Coors Porcelain Co. v. Commissioner	Analyzed the deduction of experimental expenses under Section 174 versus required standard capitalization.
Davenport v. Commissioner	Explored essential trade or business requirements and substantiation needed for Section 174 deductions.
Driggs v. United States	Addressed whether passive sponsorship of research projects constituted an active trade or business.
Dyer v. Commissioner	Evaluated if passive investment in research partnerships properly qualified for Section 174 tax deductions.
Ekman v. Commissioner	Addressed whether the taxpayer was actively engaged in a legitimate Section 174 trade or business.
Electronic Arts, Inc. v. Commissioner	Examined internal-use software transition rules and high threshold of innovation requirements for development.
Eustace v. Commissioner	Ruled off-the-shelf software modified for internal use failed the high threshold of innovation test.
Fairchild Industries, Inc. v. United States	Established research is not funded if payment is strictly contingent upon the research’s success.
FedEx Corp. v. United States	Held internal-use package tracking software qualified for credit by meeting the innovation threshold.
Fokker v. Commissioner	Examined qualified research expenses in aerospace engineering and the specific documentation required for substantiation.
Fudim v. Commissioner	Evaluated substantiation requirements for rapid prototyping research and whether engineering time was adequately documented.
Funkhouser v. Commissioner	Addressed strict substantiation and contemporaneous documentation requirements essential for claiming qualified research expenses.
Gantt v. Commissioner	Addressed trade or business requirements and baseline substantiation needed for Section 174 R&D deductions.
Gardner v. Commissioner	Evaluated strict substantiation and direct nexus requirements for establishing qualified research and experimental activities.
Garrison v. Commissioner	Addressed whether specific software development activities successfully met the technical process of experimentation test.
General Electric Co. v. United States	Addressed qualified research expense eligibility and substantiation rules for complex industrial manufacturing activities.
Geosyntec Consultants, Inc. v. United States	Examined whether capped contracts shifted financial risk to the taxpayer, avoiding funded research exclusion.
Ginsburg v. United States	Addressed passive investor limitations and trade or business requirements necessary under Section 174 rules.
Glassley v. Commissioner	Evaluated legitimate trade or business prospects for R&D partnerships claiming Section 174 tax deductions.
Green v. Commissioner	Ruled a partnership intending only to license inventions wasn’t engaged in a trade or business.
Grigsby v. United States	Construction contractor failed experimentation test by merely relying on known, established engineering principles.
Grodt & McKay Realty, Inc. v. Commissioner	Addressed sham transaction principles applied within the context of R&D tax shelter partnerships.
Haggy v. Commissioner	Evaluated strict substantiation and contemporaneous documentation standards required for claiming qualified research expenses.
Hall v. Commissioner	Addressed strict substantiation and trade or business requirements necessary for viable R&D expenses.
Harper v. Commissioner	Design and construction firm successfully satisfied the business component test for its engineering activities.
Harris v. Commissioner	Addressed whether specific software development activities met the required Section 41 process of experimentation test.
Hayden v. Commissioner	Evaluated whether R&D partnership activities constituted a realistic trade or business prospect under law.
Hewlett-Packard Co. v. Commissioner	Evaluated internal-use software transition rules and the high threshold of innovation requirements for development.
Hoover v. Commissioner	Addressed strict substantiation and necessary documentation requirements for accurately claiming qualified research expenses.
Hunsaker v. Commissioner	Evaluated funding risks and active trade or business requirements specifically for land development R&D.
International Flavors & Fragrances Inc. v. Commissioner	Addressed substantiation of QREs and scientific testing activities in flavor and fragrance product manufacturing.
Johansen v. Commissioner	Addressed strict substantiation and essential documentation requirements for legally claiming qualified research expenses.
Kandarian v. Commissioner	Evaluated essential trade or business requirements and passive investor limitations under Section 174.
Kantor v. Commissioner	Partnership lacked a realistic prospect of entering a trade or business, disallowing deductions entirely.
Kilroy v. Commissioner	Examined the deductibility of mining exploration and developmental engineering expenses under Section 174 rules.
Kollsman Instrument Corp. v. Commissioner	Analyzed funded research exclusion and specific contractual terms embedded in government defense contracts.
Koopman v. United States	Addressed active trade or business requirements and necessary substantiation for Section 174 R&D deductions.
Kozma v. Commissioner	Evaluated strict substantiation and contemporaneous documentation required for properly claiming qualified research expenses.
Kuzmbo v. Commissioner	Addressed strict substantiation and documentation requirements critical for claiming qualified research expenses correctly.
Kyocera AVX Components Corp. v. United States	Evaluated whether complex production costs qualified as R&D supply expenses versus routine manufacturing.
Lala v. Commissioner	Addressed strict substantiation and documentation requirements essential for claiming qualified research expenses accurately.
Landsberger v. Commissioner	Addressed sham transaction principles evaluated within the context of R&D tax shelter partnerships.
Leon Max, Inc. v. Commissioner	Fashion brand’s fit-testing activities were deemed aesthetic, failing the technological information requirement.
Lewin v. Commissioner	Evaluated trade or business requirements and passive investor limitations specifically under Section 174.
Lincoln v. Commissioner	Addressed strict substantiation and documentation requirements necessary for validating claimed qualified research expenses.
Little Sandy Coal Co., Inc. v. Commissioner	Denied credit because taxpayer failed to evaluate substantially all pilot model vessel elements.
Lockheed Martin Corp. v. United States	Defense research contracts were not funded research because payment remained contingent on success.
Lola Brown Trust No. 1B v. Commissioner	Addressed strict substantiation and essential documentation requirements for claiming qualified research expenses correctly.
Lomax v. Commissioner	Evaluated trade or business requirements and substantiation protocols for claiming Section 174 deductions.
Louw v. Commissioner	Denied R&D credits entirely due to a critical lack of contemporaneous time documentation.
Machise v. Commissioner	Addressed strict substantiation and documentation requirements critical for claiming qualified research expenses accurately.
Magee v. Commissioner	Evaluated trade or business requirements and passive investor limitations explicitly under Section 174.
Malmstedt v. Commissioner	Addressed trade or business requirements and required substantiation for Section 174 R&D deductions.
Martin v. Commissioner	Evaluated strict substantiation and documentation standards required for legitimately claiming qualified research expenses.
May Broadcasting Co. v. Commissioner	Addressed strict substantiation and documentation requirements needed for correctly claiming qualified research expenses.
Mayrath v. Commissioner	Expenses for building a custom luxury home were personal, not experimental Section 174 expenses.
McConnell v. Commissioner	Addressed strict substantiation and specific documentation requirements vital for claiming qualified research expenses.
Meyer, Borgman & Johnson, Inc. v. Commissioner	Engineering firm’s fixed-fee contracts were funded research because they lacked specific financial risk.
Mobil Oil Corp. v. United States	Addressed qualified research expense eligibility and documentation for complex energy industry developmental activities.
Moore v. Commissioner	Examined process of experimentation test boundaries within the context of custom product development.
Nickeson v. Commissioner	Denied Section 174 deductions because R&D partnerships were formed primarily as tax shelters.
Norwest Corp. v. Commissioner	Bank’s internal-use software development lacked significant economic risk, ultimately failing the innovation test.
Oatman v. Commissioner	Evaluated trade or business requirements and critical substantiation protocols for Section 174 deductions.
Oliver v. Commissioner	Addressed strict substantiation and documentation requirements needed for adequately claiming qualified research expenses.
Pacific McGeorge School of Law v. Commissioner	Addressed whether non-profit educational research activities qualified for specific R&D tax credit exemptions.
Pegasus Energy Group, Inc. v. United States	Evaluated essential trade or business requirements and passive investor limits under Section 174.
Pena v. Commissioner	Addressed strict substantiation and proper documentation requirements essential for claiming qualified research expenses.
Pestcoe v. Commissioner	Evaluated strict substantiation and detailed documentation required for legally claiming qualified research expenses.
Peterson v. Commissioner	Addressed strict substantiation and documentation requirements crucial for verifying claimed qualified research expenses.
Phoenix Design Group, Inc. v. Commissioner	Addressed sufficiency of evidence required to substantiate qualified research expenses for architectural engineering.
Potter v. Commissioner	Addressed strict substantiation and required documentation elements critical for claiming qualified research expenses.
Pownall v. Commissioner	Evaluated trade or business requirements and substantiation protocols necessary for Section 174 deductions.
Procter & Gamble Co. v. United States	Analyzed strict requirements for internal-use software and applied the high threshold of innovation.
Publix Super Markets, Inc. v. United States	Addressed qualified research expense eligibility and substantiation for large-scale retail software engineering systems.
Rapid Electric Co. v. Commissioner	Addressed strict substantiation and specific documentation requirements vital for claiming qualified research expenses.
Redelsheimer v. Commissioner	Evaluated key trade or business requirements and passive investor limits under Section 174.
Reiner v. Commissioner	Addressed strict substantiation and documentation requirements critical for successfully claiming qualified research expenses.
Research, Inc. v. United States	Routine engineering modifications failed to qualify as a genuine scientific process of experimentation.
Reynolds v. Commissioner	Addressed strict substantiation and documentation requirements necessary for adequately claiming qualified research expenses.
Scoggins v. Commissioner	Taxpayers had a realistic prospect of entering a trade or business, allowing deductions.
Scott Moore v. Commissioner	Examined process of experimentation test boundaries within the context of custom product development.
Saykally v. Commissioner	Evaluated trade or business requirements and substantiation guidelines necessary for Section 174 deductions.
Scull v. Commissioner	Addressed strict substantiation and documentation requirements needed for appropriately claiming qualified research expenses.
Shami v. Commissioner	Denied credits because executives’ wages lacked proper substantiation and direct technical research involvement.
Siemer Milling Co. v. Commissioner	Flour milling product development was deemed routine and failed the process of experimentation test.
Sierracin Corp. v. Commissioner	Addressed qualified research expense eligibility and substantiation guidelines for complex aerospace manufacturing activities.
Snow v. Commissioner	Landmark Supreme Court case allowing Section 174 deductions for pre-operational experimental R&D expenses.
Spellman v. Commissioner	Denied Section 174 deductions because the research partnership functioned purely as a passive investor.
Stanton v. Commissioner	Evaluated important trade or business requirements and specific substantiation for Section 174 deductions.
Stouffer v. Commissioner	Addressed strict substantiation and detailed documentation requirements for verifying claimed qualified research expenses.
Suder v. Commissioner	Allowed R&D credits for telecom company but adjusted CEO’s compensation down for QREs.
Sun Microsystems, Inc. v. Commissioner	Value of stock options properly exercised by employees qualified as eligible wage QREs.
Sutherland v. Commissioner	Addressed strict substantiation and documentation requirements crucial for establishing claimed qualified research expenses.
T.S. Brands, Inc. v. Commissioner	Addressed strict substantiation and specific documentation requirements vital for verifying qualified research expenses.
Tangel v. Commissioner	Addressed QRE substantiation and the complex aggregation rules governing commonly controlled corporate groups.
Tax & Accounting Software Corp. v. United States	Software development failed because it did not objectively discover qualifying new technological information.
TG Missouri Corp. v. Commissioner	Production molds sold to customers qualified as supply QREs because they were completely consumed.
Tiedemann v. Commissioner	Addressed strict substantiation and documentation requirements indispensable for proving claimed qualified research expenses.
Timmons v. Commissioner	Evaluated strict substantiation and detailed documentation required to correctly claim qualified research expenses.
Trinity Industries, Inc. v. United States	Allowed credit for first-in-class ships; their unique designs inherently necessitated a process of experimentation.
Tyson Foods, Inc. v. Commissioner	Addressed qualified research expense eligibility and substantiation specific to agricultural and food processing environments.
Union Carbide Corp. & Subsidiaries v. Commissioner	Pilot model testing in chemical manufacturing qualifies if properly resolving genuine scientific uncertainty.
United Stationers, Inc. v. United States	Denied credit for internal-use software because it merely adapted existing technology, failing the discovery test.
United States v. McFerrin	Taxpayers can use reasonable estimates (Cohan rule) to calculate credits if research definitely occurred.
Utro v. United States	Addressed strict substantiation and comprehensive documentation requirements critical for claiming qualified research expenses.
Valk v. Commissioner	Evaluated trade or business requirements and passive investor restrictions operating under Section 174 rules.
VLX Technologies, Inc. v. Commissioner	Addressed strict substantiation and accurate documentation requirements necessary for claiming qualified research expenses.
Webb v. Commissioner	Addressed strict substantiation and detailed documentation requirements mandatory for verifying claimed qualified research expenses.
Weinstein v. Commissioner	Evaluated strict substantiation and appropriate documentation required for legally claiming qualified research expenses.
Weisbart v. Commissioner	Addressed strict substantiation and sufficient documentation requirements needed to claim qualified research expenses safely.
Wicor, Inc. v. United States	Utility company’s integrated computer system implementation was deemed routine and didn’t qualify for credits.
Willits v. Commissioner	Addressed strict substantiation and specific documentation requirements crucial for claiming qualified research expenses properly.
Windus v. Commissioner	Addressed strict substantiation and proper documentation requirements essential for claiming qualified research expenses securely.
Wiseman v. Commissioner	Evaluated foundational trade or business requirements and passive investor limits governed under Section 174.
Wolf v. Commissioner	Addressed strict substantiation and robust documentation requirements essential for claiming qualified research expenses correctly.
Wong v. Commissioner	Evaluated essential trade or business requirements and substantiation rules governing Section 174 expense deductions.
Wood v. Commissioner	Addressed strict substantiation and contemporaneous documentation requirements necessary for validating claimed qualified research expenses.
Yara International ASA v. Commissioner	Addressed strict substantiation and explicit documentation requirements pivotal for claiming qualified research expenses successfully.
Yellow Freight System, Inc. v. United States	Addressed qualified research expense eligibility and substantiation protocols for transportation and logistics software systems.
Yeh v. Commissioner	Evaluated specific trade or business requirements and passive investor limitations strictly under Section 174.
Zacks v. United States	Addressed strict substantiation and precise documentation requirements essential for claiming qualified research expenses correctly.
Zink v. United States	Denied Section 174 deductions because the taxpayer completely lacked an actual trade or business prospect.